Federal Reserve Note

From Free Talk Live

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A Federal Reserve Note (FRN) is the most common paper currency in the United States. They are issued by the Federal Reserve and are fiat currency since they are not redeemable in specie.

The FRN is essentially an IOU that the US government has given to the Federal Reserve.

Transactions

Transactions happen with FRNs as follows:

1. The government sells a debit of $1 to the Federal Reserve
2. The Federal Reserve takes that debit and prints an FRN to signify that debit.
3. The Federal Reserve gives the government the FRN it created for the debit.
4. The government uses the FRN to pay for something, e.g. paying the salary of a bureaucrat.
5. The government official uses that FRN to buy a product from a store.
6. That store uses the FRN to buy a service from a cleaning company.
7. The cleaning company uses that FRN to pay the cleaning person.
8. The cleaning person uses that FRN to pay their taxes.
9. The government takes that FRN and turns it in to the Federal Reserve and pays interest for the privilege of using it.

Question: In the example above how many transaction happened

Answer: One. The one transaction that happened was that the government received the dollar and returned the dollar with the interest.

Bonus question: Why were the other transaction not really a transaction?

See also

• Liberty Dollar