Hey Ian,
Thanks for taking me seriously :-)
It is probably important to mention that 'the contract' is, and always has been, the keystone in every money system all the way back to Croesus who basically said "Clear cut deal folks! Use this money or your head comes off."
The social contract by which the monetary authority keeps faith with the population is the most important contract of any kind. If you understand that money enables an exchange for wealth for paper in the marketplace, you will understand that the same must occur in the initial creation of the money stock. The contract is the definition of the right by which a monetary authority withdraws wealth from the marketplace and replaces it with paper. It is one thing when you have a money stock. It is another thing altogether when you have a money *supply*! Every supply system has a source and a sink. While the money stock is increased continuously from some source, there is a counterflow of wealth towards the sink.
The written contract is of no importance. It is the contract in the minds of the populace that matters. In the 1930s the German monetary authorities launched a large newspaper and radio campaign to assure Germans that their authorities would not break faith with them. They stated in full page print advertisements that Germans could rest assured that, in that agonizing time of hyperinflation, their monetary authority would not fail to print all the money necessary to ensure that the availability of money would keep pace with inflation and ensure commerce could continue!
So what is the contract by which the Federal Reserve System continuously receives wealth in exchange for paper? continuously acts as a source of money and sink of wealth? An excellent expose of that can be found in Dr. Edward E. Popp's "MONEY, BONA FIDE OR NON-BONA FIDE". Go to Chapter 3 "Money is a Document"
http://www.appropriate-economics.org/materials/Popp.pdf
or
http://www.google.com/search?q=%22MONEY+IS+A+DOCUMENT%22+Edward+Popp+gold+certificates
He shows step by step from 1914 to the present, the gradual and subtle erosion of the contract from "This note is receivable by all National and Member banks and Federal Reserve Banks and for all taxes, customs and other public dues. It is redeemable in gold on demand at the Treasury Department of the United States in the city of Washington, District of Columbia or in gold or Lawful Money at any Federal Reserve Bank." to the infamy of "This note is Legal Tender for all debts, public and private."
He concludes with a rather astonishing observation...
"(the above) ... is certainly interesting, but the most interesting fact about all of this is that the officials of the United States government used their official power to give value to those "notes" by agreeing to redeem them, first in gold, then in lawful money, and now by accepting them as payment for taxes. All of the time the United States government has been borrowing those "notes" for the purpose of using them as media of exchange. They could use their legal power to issue United States notes or tax credit certificates without borrowing and without going in debt. Interesting, is it not?"
If I may, I would like to arrogate to myself two further sweeping declarations ...
"No equitable society is possible while the money system is created by central authority or hierarchy. Money creation is a right and *duty* of every citizen."
Hasan