Thread by @GeorgeSelgin

As this claim has met with some resistance, allow me to expand upon it with examples, both fictional.

https://twitter.com/GeorgeSelgin/status/1354227303530831873

Suppose, for the first, that I go into my district Federal Reserve bank, find one of its cash tellers (yes, the Fed has tellers), present her with a $20 Fed note, and say, Here is one your liabilities, for $20. I'd like those now."

Of course in reality the teller would call security--itself evidence that the $20 is no ordinary IOU! But suppose instead she doesn't. Instead, she says, "No problem." Then an awkward pause ensues.

Me: "Well, how about my payment?"
The teller: "It's done!"
Me: "What do you mean, 'done'? You haven't given me a thing!"
The teller: "Read the note. The text below the black seal."
Me (mumbling) "This note is legal tender for all debts public and private."

The teller: "See! You've been paid. Now get lost or I'll call security."

Now, ask yourself if the Fed has to worry about having sufficient assets on hand by which to "back" its liabilities.

Here, in contrast, is what happens when an ordinary bank teller hesitates to pay its liability holders on demand:

See the difference?

Thanks for your attention.