Frequently Not Asked Questions: Six


How much money do you make?




It’s illegal to make money unless you are the federal government, so I’m surprised you would ask me that.



Please note that Lincoln looks reserved.


Like me I’m sure you have bookmarked Article 1, Section 8, Clause 5 of the U.S. Constitution, which grants the federal government the right to “coin” money. That meant gold and silver. Our Founding Fathers distrusted and eschewed* paper money, so they expressly prohibited states from “emitting” it.



You probably also know that Abraham Lincoln signed the first U.S. federal emission law allowing the government to print bills. In 1862, government IOUs in the form of “greenbacks” began circulating their way throughout the land until they landed in the pockets of the rich. It’s been that way ever since. The government called these bills Tender Notes, which I find rather endearing. Now, of course, the government no longer sends out Tender Notes; instead, they send out Reserve Notes. On our new colorful missives, the government promises that the Federal Reserve Banks have purchased enough U.S. Treasury securities (i.e., government debt) to cover “all debts, public and private.”



If that doesn’t make you feel secure, I don’t know what would. As a nation, we have debt coming out of the “wazoo” (French for “Congress”), and as of today, it stood (momentarily) at $16,804,904,109.526, give or take 25 cents. An endless supply of debt means an endless supply of securities, which means an endless supply of Reserve Notes promising to cover any and all other debts.



Please note: The writer of this blog reserves the right to interpret history and facts in a manner that tickles her fancy. If your fancy starts to itch when reading this post, please stop immediately and read your nearest economics book.



*Use of the word “eschew” entitles any writer or reader of this post the right to liberate one piece of chocolate per writing and/or reading.