backed by the full faith and credit of the US government

[Joan.of.the.Arch]

Backed by the full faith and credit of the US government.

What does that mean, really? It's one of those phrases I've read and heard a hundred times without bothering to nail down the meaning.

Could an institution be backed by just the credit of the US Gov't, but not by it's "full faith?" Sounds so antiquated. The bottom edge of any paper bearing this notation must surely also say, "Do not fold, spindle, or mutilate." Spindling is rarely done anymore, though mutilation remains popular.

[kork13]

Basically tells the holder of the (bond, certificate, dollar, etc.) that the USG puts its trust ("faith") in the institution from which you received it, certifying that it is legitimate. If that trust goes sour and the institution fails, then the USG will be responsible for fulfilling the institution's end of the contract ("credit").

[Joan.of.the.Arch]

Are you sure? That would be like saying the institution gets the Betty Crocker Seal of Approval. Faith? The government officially has faith in an institution? How can a government have faith, and full faith no less? What agency declares this faith? Are you sure it doesn't mean something more definable such as that the company is legally incorporated? I mean-- it sounds pleasantly assuring, but surely governmental faith must be arrived at through a known protocol and have specific, real meaning? Either that, or it is just pleasant but meaningless words.

[kork13]

hahaha I'm sorry, that may have sounded too authoritative... That's more just the way that I think of it, how it makes sense to me.

from a quick search online, i found this as the best shot:

Full faith and credit: A promise meaning that the full taxing and borrowing power of the issuer, plus revenue other than taxes, will be paid in interest and repayment of the principal of a bond issued by a government entity. Source

Basically, the gov't entity will do everything it can to ensure you're repaid. However, this doesn't really seem to address the "full faith" clause...

I think I have to agree.... It may simply be an antiquated phrase that really doesn't mean quite as much anymore...

[Like2Plan]

Backed by the full faith and credit of the US government.

What does that mean, really? It's one of those phrases I've read and heard a hundred times without bothering to nail down the meaning.

Could an institution be backed by just the credit of the US Gov't, but not by it's "full faith?" Sounds so antiquated. The bottom edge of any paper bearing this notation must surely also say, "Do not fold, spindle, or mutilate." Spindling is rarely done anymore, though mutilation remains popular.

You are right, it is an antiquated term. The concept was created by Alexander Hamilton who wanted the federal govt to issue bonds backed by gold and the full faith and credit of the federal govt to pay for the debt incurred by the colonies from the revolutionary war and prior. He wanted folks to have faith in the banking system. Folks would have confidence that their debt would get paid back and be more willing to invest in the new fledging country. This in turn would encourage economic expansion and growth by having loads of money available. At the time, it was extremely controversial because some colonies had paid back their debt while others either could not of would not be able to pay it back. Those that paid the debt back didn't think it was fair, et'c. . Plus, back then a lot of folks didn't like the idea of a powerful central govt. (The folks that held the debt from some of the colonies where the paper had been basically worthless thought it was a really awesome idea. )
If you google Alexander Hamilton and "Report on Public Credit". You can find more details.

[Joan.of.the.Arch]

I was hard for the federal government to have a unified monetary policy in Hamilton's time as there still was not a single currency or coin in use. (Though, obviously, coin could have some innate value across money issuing domains. I remember my 8th grade history teacher illustrating the innate value of paper money by telling us of its sometimes use to paper-seal plaster or mud walls. This image always stuck with me.) Wasn't it not until the presidency of A. Jackson that a single federal money was created for acceptance in all states? And even then there were dire fights about establishing a national bank and how Congress could pay the nation's bills.

[Joan.of.the.Arch]

Speaking of full faith and credit, when was the last time you heard the phrase, "not for all the gold in Fort Knox?"

[PrincessPerky]

I once read a very (VERY) long article about how paper money came to be accepted, detailed it all the way back to some conch shells I believe.

Anyway has it ever struck you as ludicrous that we accept a piece of paper to be worth anything?

If it the system did not have the full faith of those using it, we would have to lug cabbage around to trade for gas.

[Like2Plan]

Anyway has it ever struck you as ludicrous that we accept a piece of paper to be worth anything?

If it the system did not have the full faith of those using it, we would have to lug cabbage around to trade for gas.

PrincessPerky,
Way back when, our currency was based on gold reserves--paper notes could be exchanged for gold--so it didn't start out that way....
Was it 1975 that we went of the gold standard completely?

[Like2Plan]

Wasn't it not until the presidency of A. Jackson that a single federal money was created for acceptance in all states? And even then there were dire fights about establishing a national bank and how Congress could pay the nation's bills.

I'm sure there were fights into A. Jackson's time (heck, there still is! ), but establishing the first national bank--that was Hamilton, too. He was one smart cookie. A lot of the systems we have today were put into to place by him.