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Legal currency simply means that a payment in that currency is considered, by courts of law, to extinguish a debt. (So a creditor can't demand to be paid in di
by lottin 6y ago
Legal currency simply means that a payment in that currency is considered, by courts of law, to extinguish a debt. (So a creditor can't demand to be paid in diamonds, for example. As long as the debtor pays in legal currency, the debt is considered extinguished.) On the other hand, a redeemable currency is a currency which the issuer promises to redeem for a certain amount of some commodity. This is independent from the fact that such a currency might (or might not) be accepted as payment in private transactions. The US dollar is legal currency, but is not redeemable.
- zhdc1 6y agoMy argument is that the same organization is the one specifying whether a particular piece of paper or commodity can or cannot be used, and under what conditions. As we've seen in the United States, currency is only legal tender because the US government says that it is - there is nothing intrinsic about either fiat, representative, or commodity-based currency as a legitimate means of exchange. All of these classifications can be changed at any time (Emergency Banking Act of 1933). Why, again, should I care about whether or not my dollar can be converted into silver if the government can, overnight, revoke redemption and outright ban ownership of the underlying commodity?
- lottin 6y agoI'm not arguing that a redeemable currency is better or worse than a non-redeemable one. I'm merely pointing out that USD is fundamentally different from an IOU, because the US dollar is non-redeemable and an IOU is redeemable. None of this has anything to do with the status of USD as legal tender, which is something you brought up for reasons that elude me (it looked like you misinterpreted the term 'redeemable' to mean 'legal tender', that's why I was trying to clear this up).