January 5, 2012

The changes have been subtle and even span generations, which accounts for few people even noticing. Yet, looking back over the history of the US currency, one immediately sees that the citizens have been fleeced!

In 1929, all newly issued US currency was standardized in size and general appearance. For example, the $10 bill would now always be printed with Alexander Hamilton’s portrait. At this time, it’s interesting to note that bills were issued in different series

• Federal Reserve Note
• Gold Certificate
• Silver Certificate

All these issues had the same general appearance, but differed primarily in their obligation to the bearer of the bill.

For example, here is a Federal Reserve Note from 1928. (Click on images for better clarity.)  The obligation is stated as “REDEEMABLE IN GOLD ON DEMAND AT THE UNITED STATES TREASURY, OR IN GOLD OR LAWFUL MONEY AT ANY FEDERAL RESERVE BANK”

Similarly, here is a Gold Certificate from 1928. This is not a note, but rather a certificate representing a specific amount of gold on deposit at the Treasury. Starting at the top of the bill and ending at the bottom, the whole concept is written as ”THIS CERTIFIES THAT THERE HAVE BEEN DEPOSITED IN THE TREASURY OF THE UNITED STATES OF AMERICA TEN DOLLARS IN GOLD COIN PAYABLE TO THE BEARER ON DEMAND”

But in 1933, Franklin D. Roosevelt took America off the Gold Standard, thus citizens were no longer able to redeem their bills for gold coin. Gold Certificates were not printed anymore. Furthermore, the words ”IN GOLD” were removed from the obligation statement of the Federal Reserve Note, leaving the redemption option to “LAWFUL MONEY” as can be seen in this 1934 note:

The US Constitution doesn’t contain the words LAWFUL MONEY. But Article 1, Section 10 prohibits states from making “any Thing but gold and silver Coin a Tender in Payment of Debts;“  While gold was withheld from the public at this time, silver was still accessible and Silver Certificates were still redeemable for silver coin.

The Treasury, therefore, had to keep silver in their vaults in order to keep the promise of redemption. But the value of silver was increasing and people were trading in their certificates for the real metal. The Treasury’s silver was drying up. As the certificates were redeemed, they were destroyed as no new silver was put in the vault to maintain proper backing.

Finally, in 1964 the Treasury halted silver redemption. All that was left then, was the Federal Reserve Note, which was now being printed with a completely relaxed obligation.

There is no longer any promise to redeem anything on demand of the bearer. Only a statement is made that this fiat paper note is “LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.”  Even though there is nothing but more paper backing this bill, citizens yearn for more of this stuff as if it’s worth something more than the empty promises of the issuing government.

They might have spruced it up a bit recently, but as the saying goes, it’s like putting lipstick on a pig…. it’s still a pig!