What does "legal tender" mean anyway?

[grondilu]

I know I could check in Wikipedia or something, but I'd like to have your view on this first.


I suspect it doesn't actually mean much.

[BitterTea]

When a currency is made legal tender, everyone is legally required to accept it for the repayment of debt. This includes things like eating a meal at a restaurant, since the meal is gone by the time the check arrives, you are in debt and they are required to accept USD. However, if I'm buying a pack of cigarettes from the gas station, they can refuse USD and demand that I pay in gold or BTC, since I am under no obligation to complete the transaction.

[FreeMoney]

When a currency is made legal tender, everyone is legally required to accept it for the repayment of debt. This includes things like eating a meal at a restaurant, since the meal is gone by the time the check arrives, you are in debt and they are required to accept USD. However, if I'm buying a pack of cigarettes from the gas station, they can refuse USD and demand that I pay in gold or BTC, since I am under no obligation to complete the transaction.

Are you saying that if a menu lists prices clearly in BTC you can eat with no obligation to pay? Or only that if no currency is mentioned then dollars are assumed?

[Dude65535]

You would still have to pay. But if you said you wanted to pay in USD (at the appropriate exchange rate) and they refused to accept your money, you are then under no requirement to pay.

[左]

If the price was in BTC, and you were in the USA, I would assume they would be required to accept payment at the going rate in USD if offered. However, I'm not a lawyer, and I could be wrong.

If you are planning on doing anything with the advice in this thread, contact a lawyer before you do. Different jurisdictions have different laws, and the advice here might not be relevant in your case. (And Wikipedia is a better place to start than this thread.)

[gigabytecoin]

When a currency is made legal tender, everyone is legally required to accept it for the repayment of debt. This includes things like eating a meal at a restaurant, since the meal is gone by the time the check arrives, you are in debt and they are required to accept USD. However, if I'm buying a pack of cigarettes from the gas station, they can refuse USD and demand that I pay in gold or BTC, since I am under no obligation to complete the transaction.

This. Case closed.

[fellowtraveler]

I know I could check in Wikipedia or something, but I'd like to have your view on this first.

I suspect it doesn't actually mean much.

Legal Tender is very important, and here's what it boils down to at a practical level:

It means that if I owe a debt to you, and I pay you in the equivalent "legal tender", then my debt is considered PAID in a court of law.

If you sue me, and I present evidence to the court that I paid you in "legal tender", then the court will rule in my favor.

This means that you have no recourse in court!! Other than payment in "legal tender".
You have no protection from the courts outside of legal tender.

Legal Tender is a form of FORCE,
which is exercised by way of depriving people of justice,
to the end of causing them to use a currency that perhaps they would not otherwise have chosen,
had they been subjected purely to natural market forces.

[grondilu]

I don't get it.

I mean: if I'm in debt to you, unless this debt was explicetely measured in dollars, it doesn't make sense that you are forced to accept dollars to repay the debt.

Say I owe you a chocolate cake.   I don't have a chocolate cake to give you right now, but I have 2 dollars.  So I give you the two dollars and tell you:

<< Sorry dude I don't have any chocolate cake to give you back, but I have those two dollars and according to Federal law you must accept them to clear my debt.  So take them and go away please. >>

Sounds silly to me.

Of course if the debt was expressed in dollars, then the problem doesn't exist, but then saying that the dollar is "legal tender" is a bit of a tautology, isn't it?

[Sultan]

grondilu, this is not entirely true.

because chances are when you borrowed the chocolate cake you would have stipulated how you would repay that debt, either as another chocolate cake or as USD or BTC, whatever. But that contract is verbally agreed BEFORE you take the cake. So at the time of the agreement you haven't gone into debt and so legal tender laws don't apply.

In the case of the restaurant. It would only apply if you rushed into a restaurant, ate the food, not knowing the price, then at the end of the meal you ask for the bill and the waiter goes: "that will be 3 goats please". You had not agreed to that in the beginning, because you assumed it would be USD, and the menu didn't show the price in USD. however in this case, the waiter is forced to accept USD as legal tender because you can't just walk out as you owe them payment for the meal you just had.

I hope this is correct. I may be wrong.

[grondilu]

Hang on, I think I finally understand.

Saying that dollar is "legal tender" basically means that law can enforce debts only if they are expressed in dollars.

Is that it?

[Jered Kenna (TradeHill)]

For me a big issue is how do you decide a fair currency exchange rate?

When I've bought things in USD outside the US I've gotten screwed.

If I'm selling something for 1btc and I don't want to take usd but I can get 2usd per 1`btc I'll take it. (current rates)

[fellowtraveler]

Well normally if you are owed a real debt, and someone tries to pay that debt with a worthless piece of paper, then you would not accept it, and you would take that person to court so you can receive actual payment.

But if the court says, "Sorry you have to accept those pieces of paper as if they were real money," then you have no choice but to accept worthless paper as if it were a payment, unless you want to become a vigilante and take things into your own hands.

This is how the system forces us to use their worthless pieces of paper. Otherwise another currency would be used due to natural market forces.

So you see, people do not use dollars because "we all agree they are money and we all agree to use them". Rather, people use dollars because force and fraud have been applied to cause this to happen where it naturally, otherwise, would not.

As long as the court can see that the appropriate amount has been paid in "legal tender" then the court will consider the debt paid.

[freetx]

Another aspect of "Legal Tender" laws not often discussed, is that from a Monetary Theory perspective you cannot use debt to pay debt.

So if I owed you "3 silver pieces", I could not in pay you with an IOU for "3 silver pieces" that someone else had given me.

Due to the nature of a FRN being in theory redeemable for USD (but not the same), they had to pass a law stating that FRN legally represents the real thing (ie. a real USD).

Of course just because they pass a law that says "a circle is now a triangle" doesn't make it true, and the follow-on ramifications of this is that now all debts are "discharged", not actually "paid in full". So the restaurant agrees to discharge your debt but you haven't actually paid them.

All of this stems from the Bankruptcy of the USA proceedings in 1933, from which we have never technically come out of Chapter 11.

The full text of HJR-192 is an interesting read, here it is below:

To assure uniform value to the coins and currencies of the Unites States,

Whereas the holding of or dealing in gold affect public interest, and are therefore subject to proper regulation and restriction; and

Whereas the existing emergency has disclosed that provisions of obligations which purport to give the obligee a right to require payment in gold or a particular kind of coin or currency of the United States, or in an amount in money of the United States measured thereby, obstruct the power of the Congress to regulate the value of the money of the United States, and are inconsistent with the declared policy of the Congress to maintain at all times the equal power of every dollar, coined or issued by the United States, in the markets and in the payment of debts,
Now, therefore, be it Resolved by the Senate and House of t Representative of the United States of America in Congress assembled, that

(a) every provision contained in or made with respect to any obligation which purports to give the obligee a right to require payments in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby, is declared to be against public policy; and no such provision shall be contained in or made with respect to any obligation hereafter incurred. Every obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein or made with respect thereto, shall be discharged upon payment, dollar for dollar, in any coin or currency which at time of payment is legal tender for public and private debts. Any such provision contained in any law authorizing obligations to be issued by or under authority of the United States, is herby repealed, but the repeal of any such provision shall not invalidate any other provision or authority contained in such law.

(b) As used in this resolution, the term 'obligation' means any obligation (including every obligation of and to the United States, excepting currency) payable in money of the United States; and the term 'coin or currency' means coin or currency of the United States, including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations.
Sec. 2 The last sentence of paragraph (1) of subsection (b) of section 43 of the Act entitled 'An Act to relieve the existing national economic emergency by increasing agricultural purchasing power, to raise revenue for extraordinary expenses incurred by reason of such emergency, to provide emergency relief with respect to agricultural indebtedness, to provide for the orderly liquidation of joint-stock land banks, and of other purposes;, approved May 12, 1933, is amended to read as follows:

"All coins and currencies of the United Stated (including Federal Reserve notes and circulating notes of the Federal Reserve banks and national banking associations) heretofore or hereafter coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties, and dues, except that gold coins, when below the standard weight and limit of tolerance provided by law for the single piece, shall be legal tender only at valuation in proportion to their actual weight.'

Approved, June 5, 1933, 4:40 p.m. 31 U.S.C.A. 462, 463

House Joint Resolution 192, 73d Congress, Sess. I, Ch. 48, June 5, 1933 (Public Law No. 10 )

[barbarousrelic]

Hang on, I think I finally understand.

Saying that dollar is "legal tender" basically means that law can enforce debts only if they are expressed in dollars.

Is that it?

The dollar is also either the de facto or de jure unit for settling debts expressed in things other than dollars.

For example, if I go to the Art Institute of Chigago and accidentally damage the painting American Gothic, a court will no doubt rule that I owe the Institue a great amount of US dollars. The court obviously can't rule that I must repay them with another original American Gothic painting, since there aren't any others.

So some law establishes US dollars as the standard unit of payment for these such debts. I'm not sure if it's the same law as legal tender laws.

[barbarousrelic]

I don't get it.

I mean: if I'm in debt to you, unless this debt was explicetely measured in dollars, it doesn't make sense that you are forced to accept dollars to repay the debt.

Say I owe you a chocolate cake.   I don't have a chocolate cake to give you right now, but I have 2 dollars.  So I give you the two dollars and tell you:

<< Sorry dude I don't have any chocolate cake to give you back, but I have those two dollars and according to Federal law you must accept them to clear my debt.  So take them and go away please. >>

Sounds silly to me.

Of course if the debt was expressed in dollars, then the problem doesn't exist, but then saying that the dollar is "legal tender" is a bit of a tautology, isn't it?

You would go to court, and the court would determine fair market value for the chocolate cake, expressed in US dollars, and rule that you owed that.

[Jered Kenna (TradeHill)]

As lame as it is  it makes sense and keeps things in order.
Could you imagine if there were 50 common paper currencies floating around the US, some highly counterfeited etc.
"I want to pay you purple dollars."
"Fuck your purple, orange is better."
etc etc

At least with the USD you can use it everywhere and transfer your assets in and out of it as you please.
If you were forced to HOLD your assets in USD that would be a hell of a lot worse.
If you want to you can all your liquid capital in BTC and transfer over $20usd when you want to go out and buy a cake.

[grondilu]

As lame as it is  it makes sense and keeps things in order.
Could you imagine if there were 50 common paper currencies floating around the US, some highly counterfeited etc.
"I want to pay you purple dollars."
"Fuck your purple, orange is better."
etc etc

Any seller can require any currency for paiement.  There is really no reason why it should be the same.

If you don't have the currency the merchand is requiring, then you just go somewhere else.

[kiba]

People sure like debt to be paid, violently if needed. This is why we got stuck in the fiat dollars regime.

[TiagoTiago]

So if someone opens a candy store that charges in grams of seashells for the gram of candy they sell, if you go there and eat some candy they would be forced to accept USD from you eventhough they have signs all over the store saying they only accept payment in seashells? (in the US of course)

[Jered Kenna (TradeHill)]

So if someone opens a candy store that charges in grams of seashells for the gram of candy they sell, if you go there and eat some candy they would be forced to accept USD from you eventhough they have signs all over the store saying they only accept payment in seashells? (in the US of course)

Some people are saying no because you don't have any "debt" and it's valid for all debt.

Maybe if your kid opened up some candy and started eating it in the store and the guy said "you owe me 20 grams of seashells" you could say "you're going to take this dollar and like it".

Big problem there is you have to figure out what 20 grams of seashells are worth...