However in order to pay a
debt in gold or silver is cumbersome and bulky and so eventually it was realized that it was
more convenient to give the paper note or the certificate as a means of exchange. This is
because the new owner of the certificate could
"accept it for value" knowing full well that
as
the holder of the certificate-
the holder in due course- he could always
exchange the value written on the note for the amount of gold or silver held in the bank or
alternatively he could continue to keep the holdings there in the bank for safe
keeping.
Anyone holding gold in a bank for safe keeping
would have a certificate or paper note he could present to the bank which the back would accept in
exchange to withdraw his gold.
So the
first paper notes certified ownership of gold or silver deposited in
a community bank
.
Surprizingly it wasn't all that long ago, within
3 generations, that one could cash a notarized piece of paper for the real money it
represented which was gold or silver in a bank! The value was never in the paper but for what
it could be exchanged or turned in for! As simple as that may seem somehow in accepting
pieces of paper for value we today seem to have forgotten
that.
Next GO TO -
Legal Tender and
the Value of Money
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