Legal tender is any form of payment that must be accepted for a debt, according to the laws of the area. Generally, the term refers to government-issued cash money such as bills and coins, as opposed to credit lines, checks, or cards. The laws surrounding legal tender have proved vital in the formation of the fiscal policy of many nations.
During the American federalist debates, those seeking to limit the powers of a central government tried to insist that no central bank should exist, and that government should be prohibited from issuing money. The anti-federalist position was largely defeated, however, and the US Constitution bans individual states from issuing money.
For many years after the Revolutionary War, America used a variety of gold and silver coins for trade. During the Civil War, policies changed due to the immense government debt, and the US government began issuing paper money. In 1965, the United States Supreme Court confirmed that all US-issued money, both paper and coin, is legal tender and therefore must be accepted for debts in the country, while foreign money is not.
In 2002, an ongoing American debate over legal tender boiled to the surface, with the introduction of the Legal Tender Modernization Act into the US House of Representatives. Among other provisions, the act demanded the end of circulation of the penny, valued at one cent in US currency. Proponents of the act argued that pennies are useless as currency and that they cannot be used in vending machines or for many purchases. They also are costly to produce, depending on pollution-heavy industries for the mining of copper and zinc. The bill was never advanced in Congress, and ignored after the close of the year's session.
One of the major debates of the early 21st century was the European adoption of the Euro. Many countries had long histories associated with their own currencies, and the switch to a common European format caused great protests among nationalists. As of 2010, 16 nations, known as the Eurozone, had adopted the currency. Notably, the United Kingdom, Denmark, and Sweden chose to exempt themselves, retaining their own forms.
Although the laws of legal tender demand that any viable currency be accepted in payment of debt, some commercial enterprises refuse large denominations of bills. Food stands, convenience stores, and market booths will commonly refuse any bill worth more than $20 or $50 US Dollars (USD). While this practice seems to violate laws, it actually is legal in many countries. According to most law theories, shopkeepers are allowed to refuse service on any grounds, under a concept called invitation to treat or invitation to bargain. So while you may not have a shopkeeper arrested for refusing your $100 USD bill for a package of potato chips, you can certainly refuse to patronize the store again.
The management of cash is extremely important to most state societies. The day-to-day business of the land is conducted according to the fiscal policy inherent in any economic system. Some historical and societal experts consider the development of tender laws to be a foundation of a functioning society, and the created systems often can give insight into the values and purpose of a nation.
