Look at a dollar bill. See where it says "Federal Reserve Note"? That word — "Note" — is the key to everything. Your promissory note and their Federal Reserve Note are the same type of instrument.
What Is a Promissory Note?
When you sign a mortgage or loan document, you create a promissory note — your written, unconditional promise to pay a specific amount.
Under the Uniform Commercial Code (UCC), this is a negotiable instrument:
Your promissory note meets all these criteria. It's not just a debt acknowledgment — it's a financial instrument with real value, tradeable in commerce.
The Federal Reserve Note Connection
Look at the name: Federal Reserve Note.
A "note" is a promise to pay. Federal Reserve Notes are negotiable instruments — the same legal category as your promissory note. They're just standardized, printed, and declared legal tender.
That statute still says Federal Reserve Notes must be "redeemed in lawful money." If FRNs ARE money, what is "lawful money"? The statute distinguishes between "Federal Reserve notes" and "lawful money" — implying they're not the same thing.
Historical Timeline
Federal Reserve Notes backed by gold at $20.67/oz. Notes were genuine promises to pay gold — negotiable instruments representing real value.
Executive Order 6102. Citizens can no longer redeem notes for gold. Foreign governments still can.
No one can redeem Federal Reserve Notes for gold. But the statute still says "redeemed in lawful money."
Federal Reserve Notes are backed by... other promises to pay. The dollar is a note backed by notes backed by notes. All money is essentially someone's promise.
The Equivalence
Your promissory note and Federal Reserve Notes are legally equivalent instruments:
| Characteristic | Your Promissory Note | Federal Reserve Note |
|---|---|---|
| Legal Category | Negotiable instrument | Negotiable instrument |
| Nature | Promise to pay | Promise to pay (obligation) |
| Source of Value | Your promise/labor | Aggregated promises |
| Backing | Your future productivity | Other promissory notes |
| Negotiability | Can be sold/transferred | Designed for transfer |
| UCC Article | Article 3 | Article 3 |
The main difference? Federal Reserve Notes are standardized and declared legal tender by statute. But legally, they're the same type of instrument.
An Overlooked Statute
There's an interesting federal statute most people never see:
Note how broad it is — including "drafts for money" and "other representatives of value." Some argue this includes private promissory notes when properly negotiated.
What Happens to Your Note
When you sign a promissory note for a mortgage:
They record it on their books at face value — as real as any deposit.
Your note is often bundled with others and sold to investors as mortgage-backed securities.
Banks can present notes to the Federal Reserve's discount window for immediate cash.
The Federal Reserve creates Federal Reserve Notes based on these assets.
Your promise → Bank asset → Fed discount window → Federal Reserve Notes in circulation
Your promissory note doesn't just represent future payment — it's the source from which currency is created.
The Question That Changes Everything
If your promissory note is the same type of instrument as a Federal Reserve Note, and your note is the source from which currency is created, then at the moment of signing:
- You created a negotiable instrument worth $300,000
- The bank received this $300,000 instrument
- The bank created a deposit in "your" account
- The bank now claims you "owe" $300,000 (plus interest)
But wait — you already gave them $300,000 in the form of your promissory note.
If promissory notes ARE payment in our monetary system (since all Federal Reserve Notes derive from promissory notes), then the moment you signed the note, you paid — with the recognized currency of the realm: a promise to pay.
A Reality Check
This framework doesn't mean you can simply stop paying your mortgage. Courts generally don't accept these arguments — they're protected by layers of legal doctrine, procedural barriers, and systemic inertia.
But understanding this changes how you see the situation:
- You're not a "borrower" who received something for nothing
- You're the source of the value that was created
- The consideration question becomes very real
- The "debt" may be something other than what it appears
Before: "I'm a borrower who owes money to the bank."
After: "I'm a creator of value whose instrument funded the transaction. Now let's examine what obligation, if any, I actually have."