legal tender

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Legal Tender

Anything that a jurisdiction has declared to be money. Historically, legal tender currency has been based on something like gold or silver; however, most money is now fiat money. That is, fiat money is that which has been declared to be legal tender by a government and would not be regarded as such without government backing. Legal tender may be used to pay a debt. In general, a merchant who does not accept legal tender currency has the debt canceled; that is, one is required to accept the legal tender or nothing at all.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

legal tender

that part of a country's MONEY SUPPLY which, in the eyes of the law, is totally acceptable in discharge of a payment or debt. Coins and banknotes (CURRENCY) issued by the government fulfil this requirement. By contrast, a dealer or creditor is within his legal rights to refuse to accept as payment for a purchase or repayment of a debt a cheque drawn against a bank account.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

legal tender

that part of a country's MONEY SUPPLY that is, in the eyes of the law, totally acceptable in payment for a purchase of a good or service or repayment of a debt. CURRENCY (BANK NOTES and COINS) issued by the government fulfil this requirement. By contrast, a trader is within his legal rights to refuse to accept as payment a cheque drawn against a BANK DEPOSIT. See MINT.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
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Both state and national banks were able to pyramid credit on the same set of lawful money reserves through the use of interest paying interbank deposits.
(14) The term "pyramiding of credit" refers to when one bank holds part of their reserves in the form of another bank's liability, and banks "pyramid" credit off the same base reserves (in this period, lawful money).
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He then discussed a banking crisis marked by a severe increase in the banks' and public's demand for "cash" or "lawful money" (again, monetary base items) that exclusively fulfilled the role of bank reserves.
Since the ratio of balances to clearings was between 2 and 5 percent, this newly created monetary base effectively substituted for "lawful money" reserves and thereby kept that much more real lawful money available as currency and reserves for banks threatened by bank runs (see Cannon 1910: 221).
Sprague, in discussing the Panic of 1907 a few years after it occurred, emphasized the fact that since the New York banks held a significant amount of reserves for the reserve city banks, and for most of the larger banks in the rest of the country, they had calls from banks everywhere for cash remittances of lawful money that they could not meet.
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Every Federal reserve bank shall maintain reserves in gold or lawful money of not less than thirty-five per centum against its deposits and reserves in gold of not less than forty per centum against its Federal reserve notes in actual circulation.(1)
The International Gold Standard and U.S. monetary policy from World War I to the New Deal

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