Professor Herbener, what is the ultimate purpose of establishing legal tender laws for government fiat money? Why would a government mandate its money for payment of debts and taxes but not make it required payment for ALL transactions including regular consumption purchases? Also, If you and I enter into a debt contract explicitly demanding payment in gold can I legally repay it in US dollars despite the terms of the contract? Thanks.
The government must use its coercive power to maintain the widespread use of its fiat money against competing media of exchange that it does not control. The first U.S. legal tender law in 1862 mandated U.S. notes as legal tender for all debts public and private. That phrase still appears on F.R. notes today, even though as you point out the courts have narrowed the scope of legal tender. As the courts winnowed down the scope of legal tender laws, other legal disabilities were placed on competing media of exchange. Gold coins were declared of equal face value with U.S. notes and therefore, as gold appreciated against the inflated notes, those who had debts discharged them with notes instead of gold. The government recently erected legal disabilities for bitcoin as a medium of exchange by declaring it “property” which is subject to capital taxation tax when used in exchange.