So what is a Liberty Dollar and why should you care about it? This is not an easy question to answer. A full discussion would require a book and space doesn’t allow me to cover all of them here. But I will try to shed some light on the controversy.
The Liberty Dollar is a privately issued currency that comes in both coin and paper money in various denominations. The main controversy is about the Liberty Dollar coins. These coins are privately minted silver bullion coins.
These Liberty Dollars are distributed by a group formerly known as the “National Organization for the Repeal of the Federal Reserve Act and the Internal Revenue Code” otherwise known as NORFED. According to their website, NORFED’s goal is to provide an alternative currency to replace the Federal Government's currency.
The Federal Reserve System was created by the Federal Reserve Act of December 23rd, 1913. The Federal Reserve is the central banking system of the United States. Federal reserve Notes are a type of fiat currency issued by the Federal Reserve System.
Fiat currency is money that receives legal tender status by virtue of a declaratory fiat or authoritative decree of a government. Fiat currency is normally associated with paper money. Without a government decree the bank notes would have no legal basis for being legal tender to pay debts of any nature, public or private. Fiat money is basically Monopoly money. Fiat currency is backed by nothing but the public’s confidence in the government that issues the paper money.
Once upon a time paper money was backed by what was known as a “gold standard.” A gold standard is a monetary system in which a standard unit of paper money is assigned a value against a fixed value of gold. Under a gold standard a currency issuer would guarantee to redeem notes, upon demand, in a certain amount of gold. The gold standard is no longer used by world governments today.
With a gold standard paper money is resistant to credit and debit expansion. There can only be a certain amount of paper money in circulation that can be redeemed in relation to the amount of gold the paper money backer has in storage. This restraint keeps governments from artificially inflating their currencies.
With fiat money governments have no restraints on inflating their currencies. They are free to print up as much as they want. In the long run this makes their currencies worthless. There are numerous examples in history of the folly of fiat money.
In the early 20th century the German’s experienced a period of hyper-inflation after the First World War. It took a wheelbarrow of German Marks to buy a loaf of bread during this period. Presently Zimbabwe is currently experiencing hyper-inflation. As this is being written their inflation rate is well over 3,000%.
Which brings us back to the issue of the Liberty Dollars. NORFED’S stated goal is to encourage the use of their Liberty Dollars to replace the Federal Government’s fiat money. The legality of this is what is generating the controversy over Liberty Dollars.
Before the 20th century many states, banks, and local communities issued their own private currencies. As precious metals bullion coins, Liberty Dollars can be compared to many similar types of non-government bullion coins. The real question is whether it is legal to spend the Liberty Dollars as you would normal U.S money.
According to a notice posted on the U.S. Mint’s website, it is illegal to use Liberty dollars as legal tender. On the other hand NORFED argues that the use of their money is “voluntary bartering.” NORFED presently has a lawsuit against the U.S. Mint to retract their website notice.
According to the U.S. Mint consumers may find advertisements for Liberty Dollars confusing and should make note of issues related to these private bullion coins:
First the advertisements refer to Liberty Dollars as being “real money” and/or “real currency. Liberty Dollars resemble real money because:
• They bear inscriptions such as “Liberty,” “Dollars,” “Trust in God,” and “USA” and other similar features on real coins.
• The Liberty Dollars feature images that are similar to U.S. coins, such as the torch on the reverses of the currently issued dime coin. The 1986 Statue of Liberty commemorative silver dollar and the 1993 Bill of Rights commemorative half-dollar, and the Liberty Head designs found on many U.S coins from the mid-1800s to the early 1900s.
Despite their similar appearance to real U.S. coins these private bullion coins are not considered to be genuine U.S. money and as such are not legal tender by the U.S. Mint.
Secondly, the advertisements imply that the NORFED Liberty Dollars are “legal” and “constitutional.” However if you have forgotten your civics lessons, under the U.S Constitution, only Congress has the exclusive power to coin the money of the United States and regulate its value. Of course many such as NORFED argue that Congress has forfeited its duty to the Federal Reserve System. But that is another issue we won’t get into here.
There is nothing illegal about buying Liberty Dollars and collecting them. Trying to spend them as legal tender is what is likely to get you into trouble. You can go to http://www.usmint.gov to see their notice on Liberty Dollars and you can go to http://libertydollar.org to get NORFED’s view on their coins legal status as legal currency.
As a postscript, NORFED was dissolved by its Board of Directors on January 1, 2007 and is now doing business as Liberty Services which now distributes the Liberty Dollar as a non-political gold and silver currency.
A pure copper version of the Liberty Dollar is being introduced in a $1 denomination to compete with the U.S. Mint’s new Presidential Dollar coins. The new copper Liberty Dollar coins will be silver dollar size and contain one ounce of pure copper. The copper Liberty Dollar will have the same features as the one ounce silver bullion Liberty Dollars.