Federal Reserve cracks down on competitive money
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The almighty dollar has some would-be competition: The Liberty Dollar purports to be an alternative to the U.S. Dollar; “Fed Ex competes with the Post Office [...] now there’s the Liberty Dollar competing with the greenbacks printed by your government,” Paul Harvey is quoted as saying on the Liberty Dollar website. And what’s even better is that the Liberty Dollar is made of precious metals (gold or silver) and the Notes are backed by gold and silver in a vault in Idaho.
It would be really nice if it were that simple. And it’s a very appealing argument that the website gives. The U.S. Dollar has lost 96% of its purchasing power since the Federal Reserve was created in 1913; this much is true, or almost true. In the meantime, precious metals have been removed from circulated currency. So the answer to this is to pay with “real” one-ounce silver “$20″ Liberty Dollar coins just like you’d whip out a $20 bill. Bring “real money” back into circulation. Plus, the website markets it as a money-making opportunity and a “fun” thing to do; its motto is “Have Fun, Do Good, and Make Money.” From some eBay auctions I’ve run across it looks like the organization even pays its “Liberty Associates” — of which there are about 2,500, according to an article in today’s USA Today — to recruit others.
The wet blanket to all of this fun: It’s illegal to put alternative money back into circulation as U.S. Dollars. The U.S. Mint warned consumers of this recently. The U.S. Government is the only entity that can control the money supply. Remember that $200 bill with George W. Bush on the front that someone used to buy stuff at a Dairy Queen? Same thing. It’s the passing off of alternative currency as “real money” (according to the U.S. Government) in the sense that it can take it to a U.S. Bank and deposit it as U.S. Dollars that’s a crime.
Now, owning these Liberty Dollars is not in itself illegal, as far as I know. You can own then for the silver content, and barter with them in exchange for goods and services just like you can barter with just about anything else. Just don’t pass them off for U.S. Dollars according to the value in dollars that’s printed on the face.
I suspect that NORFED, the National Organization for the Repeal of the Federal Reserve Act and the Internal Revenue Code (comment: wouldn’t that be nice!) might have some problems pushing these coins if silver goes way up. Right now, the melt value of a “$20″ Liberty Dollar which contains one ounce of silver, is a little over $10. This spread currently allows them to sell the coins at under “face” value — say, $16 each — at a profit, while the people receiving the coins are led to believe that they can “spend” them as $20 bills. But once silver goes up, which I think it will, to say, $25/ounce, NORFED can’t sell these coins at a profit any more because the silver costs more than the coin’s face value. So what other choice would NORFED have than to “architect” a new coin, say a $100 coin with two ounces of silver? But that goes against the posit that these Liberty Dollars were “real money,” doesn’t it? What would instead happen is that people would hoard the $20 one-ounce Liberty Dollar coins just like they hoarded pre-1965 silver dimes, quarters, half-dollars, and dollars. They wouldn’t spend them like regular money — it would be dumb to do that. The coins would go out of circulation, and the “fun” of using “real money” would go away.
(Correction: The company has already re-based its currency once (from a $10 one-ounce coin to a $20 one-ounce coin), and everyone with the current certificates, electronic money, and coins were allowed to turn them in for double the dollar denominations. There was a fee to exchange the coins, though. Sorry for the omission.)
At best, the Liberty Dollars are an expensive way to buy silver if you don’t really care about numismatic value and if you don’t want to “spend” them. At worst, some people could end up in jail if they pass them off as legal tender. The best course of action is to hold on to them if you have them.
2 Responses to “Federal Reserve cracks down on competitive money”
By John Forster on Sep 19, 2006 | Reply
Not a good idea for NORFED to use “dollar” for their alternate currency. The term, previously defined by the Coinage Act of 1792, and, as far as I know, never legally changed, has been corrupted to meaninglessness. As far as I know, no one can now define or describe the American banker’s dollar as it is now used. If the dollar is a nothing, then the Federal Reserve/Federal Government partnership is guilty of deadly lies. If the dollar is actually something, then the Federal Reserve banking system has displaced the Creator Jehovah of the Bible and Jesus Christ, God the Son. The control and thus, the salvation of our governmental and economic system is in the hands of these institutions who “create dollars” out of nothing. Which American war, from 1776 to the present, has not been caused or made possible by fiat currency? When we trade, let us be honest about the Substance: what it is we are trading, the Measure: how we are measuring it’s dimensions or weight, and the Quantity. The banks do a perfect job of accounting for the quantity in your account. What substance is in your account? How is it measured?
I highly recommend Paul Hein’s book “All Work and No Pay”, available on the web.