Comment: Think capacity ...

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In reply to comment: Redeeming FRNs for Lawful Money (see in situ)

Think capacity ...

A note is a tool. A tool can have multiple uses or capacities. A tool can be used as a shovel to dig a hole or as a weapon to beat someone upside the head.

Take this concept of a tool that can be a shovel or weapon depending on use and apply it to a federal reserve note.

What would be the distinction whether or not a note functions as legal tender or lawful money? It would merely be an accounting distinction. If you redeemed a negotiable instrument or federal reserve note for lawful money and received a federal reserve note there must be an accounting entry.

So what would happen if every federal reserve note in circulation was redeemed for lawful money? Let's look at a simplified federal reserve balance sheet with the amounts omitted:


Gold certificates
Treasury securities


Federal reserve notes outstanding

Normally, assets would have to be converted to redeem but what actually happens is this:

The fed extinguishes $1 of liability by creating a new $1 of liability providing a new note. So why would the fed care about accounting entries to redeem in lawful money when the net result is the exact same amount of liability?

The real benefit of redeeming in lawful money is not to impact the federal reserve system but to exercise one's natural and fundamental right to exist without being regulated by codes and statutes. The benefit is not trading using a federal privilege of exchange but lawful money. Where government has you by the balls is trying to convince a jury of any of this without evidence. The average person is going to say you used a federal reserve note and be oblivious the capacity of said note unless one has access to accounting entries when a note is redeemed for lawful money. On the other hand if your intention is to subpeona federal reserve accounting records to prove or disprove liability accounting entries when a note is redeemed for lawful money and a case was suddenly dropped or dismissed ... maybe your on to something.