While the Federal Reserve system holds government securities as collateral for the currency in circulation, they are not redeemable. Dollar once included the disclaimer 'This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank. United States Currency. The United States issues paper currency and coins to pay for purchases, taxes, and debts. American paper currency come in seven denominations: $1, $2, $5, $10, $20, $50, and $100. The Bureau of Engraving and Printing (BEP) manufactures paper money.

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'Lawful money' is a term used in the Federal Reserve Act, the act that authorizes the Board of Governors of the Federal Reserve System to issue Federal Reserve notes. The Act states that Federal Reserve notes 'shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.' The Act did not, however, define the term 'lawful money,' but up until 1913, the only currency issued by the United States that was legally recognized as 'lawful money' was various issues of 'demand notes' (subsequently known as 'old demand notes') and 'United States notes' authorized by Congress during the Civil War.

At the time, some currency was not considered legal tender, although it could be used by national banking associations as 'lawful money reserves.' Thus, the term 'lawful money' had a broader meaning than the term 'legal tender.'

In 1933, Congress changed the law so that all U.S. coins and currency (including Federal Reserve notes), regardless of when issued, constitutes 'legal tender' for all purposes. Federal and state courts since then have repeatedly held that Federal Reserve notes are also 'lawful money.' Milam v. U.S., 524 F.2d 629 (9th Cir. 1974), is typical of the federal and state court cases holding that Federal Reserve notes are 'lawful money.' In Milam, the United States Court of Appeals for the Ninth Circuit reviewed a judgment denying relief to an individual who sought to redeem a $50 Federal Reserve Bank Note in 'lawful money.' The United States tendered Milam $50 in Federal Reserve notes, but Milam refused the notes, asserting that 'lawful money' must be gold or silver. The Ninth Circuit, noting that this matter had been put to rest by the U.S. Supreme Court nearly a century before in the Legal Tender Cases (Juilliard v. Greenman), 110 U.S. 421 (1884), rejected this assertion as frivolous and affirmed the judgment.

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Scrip used by Olga Coal Company, Coalwood, West Virginia

Company scrip is scrip (a substitute for government-issued legal tender or currency) issued by a company to pay its employees. It can only be exchanged in company stores owned by the employers.^[1]^[2]^[3] In the United Kingdom, such truck systems have long been formally outlawed under the Truck Acts.

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In the United States, mining and logging camps were typically created, owned and operated by a single company.^[4] These locations, some quite remote, were often cash poor;^[1]^[2]^[3] even in ones that were not, workers paid in scrip had little choice but to purchase goods at a company store, as exchange into currency, if even available, would exhaust some of the value via the exchange fee. With this economic monopoly, the employer could place large markups on goods, making workers dependent on the company, thus enforcing employee 'loyalty'.^[4]^[5] While scrip was not exclusive to the coal industry, an estimated 75 percent of all scrip used was by coal companies in Kentucky, Virginia, and West Virginia.^[6] Because of this, many derived nicknames for the type of currency originated in the Appalachian mining communities, such as 'Flickers,' 'Clackers,' and 'Dugaloos.'^[7]

Tokens were made out of a variety of metals, including brass, copper, zinc, and nickel.^[7] There were additionally 'compressed fibre' coins produced during World War II in an effort to conserve metals for wartime production.^[7]

Lumber company scrip[edit]

In 19th century United States forested areas, cash was often hard to come by.^[1]^[2]^[3] This was particularly true in lumber camps, where workers were commonly paid in company-issued scrip rather than government issued currency.^[3]

In Wisconsin, for example, forest-products and lumber companies were specifically exempted from the state law requiring employers to pay workers' wages in cash.^[3] Lumber and timber companies frequently paid their workers in scrip which was redeemable at the company store. Company-run stores served as a convenience for workers and their families, but also allowed the companies to exploit workers for increased profit. In certain cases, employers included contract provisions requiring employees to patronize the company stores. Employees who wanted to change their scrip to cash generally had to do so at a discount.^[3]^[4]

Lumber company scrip was redeemable in lumber as well as other merchandise. According to the Wisconsin Historical Society, such an option may have appealed to new settlers in the region, who worked in the lumber camps in winter to earn enough money to establish a farm. Taking some of their wages in lumber may have helped them build a much-needed house or barn.^[3]

Yawkey-Bissell Lumber Company Scrip for White Lake, Wisconsin

Coal company scrip[edit]

Various forms of coal scrip

Coal scrip is 'tokens or paper with a monetary value issued to workers as an advance on wages by the coal company or its designated representative'.^[8] As such, coal scrip could only be used at the specific locality or coal town of the company named. Because coal scrip was used in the context of a coal town, where there were usually no other retail establishments in that specific remote location, employees who used this could only redeem their value at that specific location.^[9] As there were no other retail establishments, this constituted a monopoly. The coal town was established by out-of-state corporations and fueled by cheap labor provided by European immigrants who came to Appalachia in search of work in the growing coal industry.^[10]

The use of coal scrip dates to the late 1800s as coal companies looked for a way to eliminate keeping large cash reserves.^[10] Rather than receiving compensation in United States currency, many miners received payment entirely in scrip, which could be used only at the town store, eliminating any prospects of acquiring generational wealth.^[11] The result was a situation in which miners were perpetually in debt to their employer, receiving only an 'advance against unearned wages.'^[12] Because the company store was often the only place to spend scrip, the company could charge exorbitant prices in these rural communities compared to prices in major cities.^[13]

$1 scrip coin from Peerless Coal & Coke Co., Vivian, West Virginia

There was no uniform design, but each coin generally identified the location of the coal company town and predominantly featured the words 'non-transferrable' to communicate to recipients it could not be transferred for U.S. currency.^[11]

Coal scrip was deemed unconstitutional if non-transferable in the early-twentieth century, but continued to exist in Kentucky and West Virginia until offic

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Lumber company scrip[edit]

Coal company scrip[edit]