How Legal Tender Is Issued in The U.S. Today
Paper money is a form of currency that is physically printed by the Bureau of Engraving and Printing, under authority of the Federal Reserve System. The Bureau of Engraving and Printing is part of the U.S. Treasury Department, whereas the Federal Reserve is not. In contrast to paper money, coins are physically produced by the U.S. Mint, within and under authority of the U.S. Treasury. The Federal Reserve System can authorize as much paper money as it sees fit, but the U.S. Treasury is restricted by law to a certain maximum amount of coinage in circulation.
The Federal Reserve System can increase the money supply by creating money to purchase U.S. Government securities on the open market. Article I, Section 8 of the Constitution explicitly contemplates U.S. Government "securities."
Those "open market operations" involve the buying and selling of U.S. government securities, including federal agency securities and also (as happened, for instance, in response to the recent economic turmoil) mortgage-backed securities. Federal agency securities have been issued by the federal government to finance deficit spending.
The Federal Reserve System can also increase the money supply by allowing banks to issue more loans, which is accomplished by reducing the reserve requirement ratio. This regulation of banks is pursuant to the Commerce Clause. Conversely, the Federal Reserve System can reduce the money supply by selling securities or by increasing the reserve requirement ratio.
Read more about this topic: Legal Tender Cases
Famous quotes containing the words legal, tender, issued and/or today:
“We should stop looking to law to provide the final answer.... Law cannot save us from ourselves.... We have to go out and try to accomplish our goals and resolve disagreements by doing what we think is right. That energy and resourcefulness, not millions of legal cubicles, is what was great about America. Let judgment and personal conviction be important again.”
—Philip K. Howard, U.S. lawyer. The Death of Common Sense: How Law Is Suffocating America, pp. 186-87, Random House (1994)
“That good disposition which boasts of being most tender is often stifled by the least urging of self-interest.”
—François, Duc De La Rochefoucauld (1613–1680)
“A small voice issued from a bed placed in utter darkness where no ray of light was admitted, complaining of bad nerves, low spirits, and terrible dreams.”
—Sarah Fielding (1710–1768)
“The great majority of people in England and America are modest, decent and pure-minded and the amount of virgins in the world today is stupendous.”
—Barbara Cartland (b. 1901)