In a more modern example, the Zimbabwean government demonetized its dollar in 2015 to combat the country`s hyperinflation. At its peak, Zimbabwe`s hyperinflation reached a monthly growth of 79.6 million percent and an annual growth of 89.7 sextillion percent. The three-month process involved eradicating the Zimbabwean dollar from the country`s financial system and consolidating the U.S. dollar, Botswana-Pula and South African rand as the country`s legal tender to stabilize the economy. Shortly after Hepburn, a change in the composition of the court forever changed the judicial interpretation of legal tender. The day Hepburn v. Griswold was returned, President Grant sent the names of William Strong and Joseph P. Bradley to the Senate as candidates to fill vacancies on the Supreme Court. Both men were confirmed by the Senate and appointed to their seats in March 1870. Four days after his appointment, the Attorney General asked the court to consider the two pending legal tender cases. By five votes to four, the Court ordered a reconsideration of the question of legal tender.
[10] This action not only undermined public opinion on the integrity of the judiciary, but also signaled the formation of a new majority in favor of legal tender. The court then proceeded to hear both cases, Knox v. Lee and Parker v. Davis, 79 Americans 457 Legal tender is used exclusively for the secured settlement of debts and does not affect a party`s right to refuse service in a transaction. [38] The New Taiwan Dollar issued by the Central Bank of the Republic of China (Taiwan) is legal tender for all payments made within the territory of the Republic of China, Taiwan. [33] However, since 2007,[34] candidates for election officials in the Republic of China are no longer allowed to file a deposit. [35] In 1914, the Banking Amendment Act gave legal tender to each issuer`s banknotes and removed the requirement that banks authorized to issue banknotes exchange them for gold on demand (the gold standard). In the case of the euro, notes and coins of the old national currencies were in certain cases legal tender from 1 January 1999 to 28 February 2002. Legally, these notes and coins were considered non-decimal subdivisions of the euro. [ref. needed] After failing to find a constitutional basis for the legislation, Chase isolated the negative effects of these laws. The Fifth Amendment states that the United States may not deprive any person of “life, liberty, or property without due process.” By requiring the repayment of debts on an amortized medium of exchange, legal tender laws affected the obligation to contract.
The creditors were therefore denied preparation by Congress without due process. Chase said the legislation was nothing short of a violation of the Fifth Amendment`s due process clause. That view was consistent with the subsequent substantive interpretation of the procedural clause. Under this interpretation, a person could be denied due process even if all procedural conditions are met. In later cases, such as Allgeyer v. Louisiana, 165 USA 578 (1897), the Court repealed various non-monetary economic orders by applying this substantive approach to the procedural clauses of the Fifth and Fourteenth Amendments. [9] Chase`s view in Hepburn recognized the true nature of legal tender laws: such legislation is unconstitutional economic regulation. The history of banknotes in New Zealand was much more complex. In 1840, the Union Bank of Australia began issuing banknotes under British law, but these were not automatically legal tender. In writing his opinion, Chase sought in vain a constitutional basis for legal tender. Article I, Section 10, clearly denied States the power of legal tender. However, this fact did not automatically mean that this authority rested with the federal government.
Chase found no explicit congressional authority on legal tender in the text of the Constitution. It also stated that such actions cannot reasonably be implied as necessary and appropriate for the exercise of an expressed power. John A. Sparks noted in his essay “The Legal Standing of Gold – Contract Versus Status” that the Tenth Amendment was reserved for the powers of states that were not delegated to the United States. The powers denied to states that were not delegated to the United States were therefore reserved for the people. [8] Since the declaration of legal tender was prohibited to the states and not delegated to Congress, the acceptance of a currency on the market should be freely determined. Maundy currency is legal tender but may not be accepted by retailers and is worth much more than its face value due to its rare value and silver content. In 1901, banknotes in circulation in Australia consisted of banknotes payable in gold coins and issued by merchant banks and Queensland treasury bills. Banknotes circulated in every state except Queensland, but were not legal tender, except for a brief period in 1893 in New South Wales.
However, there were certain restrictions on their issuance and other provisions to protect the public. Queensland Treasury notes were issued by the Queensland Government and were legal tender in that state. Banknotes of both categories remained in circulation until 1910, when the Commonwealth Parliament passed the Australian Notes Act 1910 and the Bank Notes Tax Act 1910. The Australian Notes Act of 1910 prohibited the circulation of government notes as currency, and the Bank Notes Tax Act of 1910 imposed a tax of 10% per annum on “all notes issued or reissued by a Commonwealth bank after the enactment of that Act and not repaid”. [18] [19] These laws effectively ended the issuance of banknotes by commercial banks and the Queensland Treasury. The Reserve Bank Act of 1959 expressly prohibits persons and states “from issuing a bill of exchange or note for the payment of money payable on demand to the holder and intended for circulation.” [20] In this sense, Gresham`s Law can also be taken into account for global currency markets and international trade, as legal tender laws apply almost by definition only to national currencies. In world markets, hard currencies such as the US dollar or the euro, which are relatively more stable over time (good currency), tend to circulate as an international medium of exchange and are used as international price benchmarks for globally traded commodities. The weaker and less stable currencies (bad currency) of less developed countries tend to circulate very little or not at all outside the borders and jurisdiction of their respective issuers to impose their use as legal tender. With international competition in currencies and without a single legal world currency, good money circulates and bad money is kept out of general circulation by the functioning of the market. After the Civil War, paper money was controversial as to whether it should be accepted as a means of payment.
In 1869, Hepburn v. Griswold concluded that Henry Griswold did not have to accept paper money because it could not really be “legal tender” and that it was unconstitutional as a legally enforceable means of paying debts. This led to the legal tender cases in 1870, which overturned the previous judgment and established fiat money as a constitutional and appropriate legal tender that must be accepted in all situations. [44] Throughout history, coins have produced coins made of gold, silver and other precious metals that originally gave them their value. Over time, coin issuers sometimes reduced the amount of precious metals used to make coins and tried to issue them as full-value coins. Normally, new coins with fewer precious metals would have a lower market value and would trade at a discount or not at all, and older coins would retain a higher value. However, with government involvement, such as legal tender laws, new coins would generally have the same face value as old coins. This means that new coins would be legally overvalued and old coins would be legally undervalued. Governments, executives and other coin issuers would participate to generate revenue in the form of seigniorage and pay off their old debts (which they borrowed in old coins) in the new coins (which have less intrinsic value) at face value. Banknotes and coins may be withdrawn from circulation, but remain legal tender. U.S.
bank notes issued at any given time are legal tender even after they have been withdrawn from circulation. Canadian $1 and $2 notes are legal tender even if they have been withdrawn and replaced by coins, but Canadian $1,000 notes are legal tender even if withdrawn from circulation in a bank. However, banknotes withdrawn from circulation are usually no longer legal tender, but can be exchanged for common currency at the Bank of England itself or by post.