Exchange service
From 1998 to July 2009, Liberty Services exchanged Federal Reserve Notes (US Dollars) for silver Liberty Dollars (and later gold and copper). A partial list of merchants accepting Liberty Dollars can be found online.[dead link]
[edit] Currency reform
Liberty Dollar's original name was "National Organization for the Repeal of the Federal Reserve and the Internal Revenue Code" (NORFED). Since its founding, the organization has asserted that the Federal Reserve is unconstitutional and harmful. The company is now in a series of legal battles both defending their exchange service and challenging exclusivity assertions made by the US Mint (see Legal issues).
A number of alternative currencies exist in the United States, including the Liberty Dollar, Phoenix Dollars, Ithaca Hours, and digital gold currency. Unlike some other alternative currencies, both Liberty Dollars and Phoenix Dollars are denominated by weight and backed by a commodity. Phoenix Dollars are silver, while Liberty Dollars are gold, silver, platinum, or copper. Liberty Dollars differ from other alternative currencies in that they carry a suggested US dollar face value.
Community currencies may present problems for users because there is little to stop the issuer from producing more currency. Only the allocation of precious metals stands in a coiner's way. The primary difference between the Liberty Dollar and the fiat US dollar is that Liberty Dollars are backed by an objective measure — a weight in metal.
A previous attempt at establishing an alternative currency in the United States of America focused on tying the value of the currency to a specific unit of time; i.e 1 hour = 1 Time Dollar. The future value of the currency depends on the willingness of people to swap their labor time, regardless of the market value of the labor provided.
Liberty Dollar base values, discounts, and commissions
Liberty Dollar is based on the Liberty Dollar "base value" created by Bernard von NotHaus. As of 2009[update], the base value of Liberty Dollar was $20 Liberty Dollars to one ounce of silver. At the time the Liberty Dollar operation was closed, one ounce Liberty Dollar gold pieces were denominated $1,000 with a maximum charge of 10% over spot price with membership. The previous base values were $10 silver ounce, $20 silver ounce and $500 gold ounce. Non-members pay full face value for all currency except for certain Special and Numismatic items. Members' discounts range from 0% to 50%+ (actually, for short periods during crossovers it is possible that even members cannot buy Liberty Dollars at cost or less).
Liberty Dollar associates and merchants used to exchange for Liberty Dollars at a discount, so they could "make money when [they] spend money."[citation needed] To further distinguish how Liberty Dollar works, von NotHaus transitioned to a commission structure in June 2007 where associates and merchants receive a commission in the form of extra Liberty Dollars when they place their orders. Regional currency officers have always received larger discounts, since they are the regional distributors and official representatives of Liberty Services.
The Liberty Dollar associate and merchant discounts can range from 0.0%-50%+ (zero to more than fifty percent) depending on where the price of silver is, relative to the Liberty Dollar base value, the Liberty Dollar base value crossover points, and the time periods the price has stayed above varying moving-day averages over 30, 60 or 90 days in a fluctuating market, based on Liberty Dollar formulas worked out by von NotHaus.
Regional currency office
A "regional currency office" is a kind of distributor of Liberty Dollars. In exchange for a fee paid to Liberty Dollar they can purchase Liberty dollars for resale at a discount. They are also authorized to purchase, convert, or perhaps exchange Liberty Dollars for Federal Reserve Notes.
Legal issues
Federal Government response
Numerous individuals within the U.S. Government have been interviewed regarding the Liberty Dollar. The Liberty Dollar organization asserts that one U.S. Secret Service agent has stated "It's not counterfeit money"[10] while remaining "skeptical" of NORFED. Another agent is reported to have warned that the Liberty Dollar "appears to be in violation of 18 U.S.C. § 514." The minting of Liberty dollars also appears to be in violation of 18 U.S.C. § 486.
The promoter of the Liberty Dollar asserts that Claudia Dickens, spokeswoman for the U.S. Treasury Department's Bureau of Engraving and Printing, had previously said American Liberty Currency is legitimate. Dickens was quoted as having said "There's nothing illegal about this", after the Treasury Department's legal team reviewed the currency. "As long as it doesn't say 'legal tender' there's nothing wrong with it."
In 2006 the U.S. Mint issued a press release stating that prosecutors at the Justice Department had determined that using Liberty Dollars as circulating money is a federal crime. The press release also stated that the "Liberty Dollars" are meant to compete with the circulating coinage (currency) of the United States and such competition consequently is a criminal act. The Justice Department also stated that the Liberty Dollar was confusingly similar to actual U.S. currency, and the language used on NORFED's website was deceptive.
The Liberty Dollar organization responded to the Mint's press release by stating that "[t]he Liberty Dollar never has claimed to be, does not claim to be, is not, and does not purport to be, legal tender." The promoters of the Liberty Dollar have asserted that the Liberty Dollar is not legal tender, and that legal tender and barter are mutually exclusive concepts. The promoter asserts that the Liberty Dollar is a numismatic piece or medallion which may be used voluntarily as barter.
[edit] Von NotHaus v. the U.S. Mint
On March 20, 2007, Liberty Services owner Bernard von NotHaus filed suit in the District Court for the Southern District of Indiana against the U.S. Mint's claims regarding the Liberty Dollar. Defendants include Henry M. Paulson, Secretary of the Treasury, Alberto R. Gonzales, former Attorney General of the United States, and Edmund C. Moy, Director of the Mint. The suit seeks a declaratory judgment that circulating Liberty Dollars as a voluntary barter currency is not a federal crime and an injunction barring the Defendants from publicly or privately declaring the Liberty Dollar an illegal currency and to remove any such declarations from the U.S. Mint's website.
FBI / Secret Service raid
The Liberty Dollar offices were raided by agents of the Federal Bureau of Investigation (FBI) and the United States Secret Service on November 14, 2007. Bernard von NotHaus, the owner of Liberty Services, sent an email to customers and supporters saying that the FBI took all the gold, silver, and platinum, and almost two tons of Ron Paul Dollars. The FBI also seized computers and files and froze the Liberty Dollar bank accounts.[17] Von NotHaus's email linked to a signup page for a class action lawsuit so that the victims might recover their assets. At the same time, all forms on his website relating to purchases of Liberty Dollars became nonfunctional.
Copies of the email and the warrant documents have been posted to the website. The seizure warrant was issued for money laundering, mail fraud, wire fraud, counterfeiting, and conspiracy.
The local Evansville Courier & Press reported the email, stating that "FBI Agent Wendy Osborne, a spokeswoman for the FBI's Indianapolis office, directed all questions on the raid to the Western District of North Carolina U.S. Attorney's Office. A spokeswoman there said she had no information on the investigation. Bernard von NotHaus, the group's monetary architect and the author of the email, did not immediately respond to a message seeking comment."
The Associated Press quoted von NotHaus on November 16, 2007, as saying that the federal government was "running scared right now and they had to do something .... I'm volunteering to meet the agents and get arrested so we can thrash this out in court."
As of November 2008[update], the case had not yet gone to trial.
A federal grand jury brought an indictment against von NotHaus and three others in May 2009 in United States District Court in Statesville, North Carolina,and von NotHaus was arrested on June 6, 2009. Bernard von NotHaus is charged with one count of conspiracy to possess and sell coins in resemblance and similitude of coins of a denomination higher than five cents, and silver coins in resemblance of genuine coins of the United States in denominations of five dollars and greater, in violation of 18 U.S.C. § 485, 18 U.S.C. § 486, and 18 U.S.C. § 371; one count of mail fraud in violation of 18 U.S.C. § 1341 and 18 U.S.C. § 2; one count of selling, and possessing with intent to defraud, coins of resemblance and similitude of United States coins in denominations of five cents and higher, in violation of 18 U.S.C. § 485 and 18 U.S.C. § 2; and one count of uttering, passing, and attempting to utter and pass, silver coins in resemblance of genuine U.S. coins in denominations of five dollars or greater, in violation of 18 U.S.C. § 486 and 18 U.S.C. § 2.[24]
On July 28, 2009, von NotHaus entered a plea of not guilty.[25] Criticism
Because of fluctuations in the price of silver, Liberty Dollars cannot be bound to a specific valuation in United States dollars over time; Liberty Services maintains the parity of one Liberty Dollar to one US$1 by re-basing Liberty Dollars as the purchasing power of the US Dollar (Federal Reserve Note) falls, leading to the circulation of two different versions during re-basing transition periods. Liberty Services has plans for further re-basing as the dollar continues to fall. Note that this only deals with newly created Liberty Dollars; regardless of US$ inflation, Liberty Dollars already in circulation are not re-based unless shipped back to Liberty Services for that purpose.
A one troy ounce Liberty Dollar had a silver value between $16 and $18 as of October 2009[update] and between $25 and $30 as of October 2010[update] . The Liberty Dollar was sold to merchants and "Liberty Associates" at a price that represented a discount to the MSRP face value, and a premium to the silver value. The differential in price depends both upon the spot price of silver, and the last fixed base price assigned by Liberty. In 2009, when the sales price was ~$35.85, that price represented a premium of ~$19 above the spot price of silver and was intended to be spent at its ALD50 monetary value, for a ~$33 premium over its intrinsic value. For comparison, a one troy ounce American Silver Eagle (US$1 monetary value) is distributed by the U.S. Mint for $2 over the spot price of silver . Liberty Dollar distributors are given a large discount when exchanging US Dollars for Liberty Dollars.
Liberty Dollars are purchased at par for US$1 each, yet conversion from ALD to US$ is at discount based on commodity spot price.[30] As the US$ decreases in purchasing power, the intrinsic value of the ALD remains relatively constant. But the ability of a holder of ALDs to barter based on their intrinsic value is inefficient because of the lack of a highly liquid exchange process.
Critics of the Liberty Dollar include Carl Watner, who publishes the voluntaryist newsletter The Voluntaryist, and Las Vegas libertarian writer Vin Suprynowicz, who refers to Liberty Services as a multi-level marketing system.
