Liberty Dollar

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The Liberty Dollar is a private currency. It is issued by a private warehouse, and distributed to the public by an organization called NORFED, which is a partial acronym for "National Organization for the Repeal of the Federal Reserve and the Internal Revenue Service." NORFED describes itself as a non-profit company based in Evansville, Indiana, founded to promote the Liberty Dollar. The company that mints and warehouses Liberty Dollars (SMI in Couer d'Alene, Idaho) is a for-profit business. NORFED offers people a way to get the currency at a discount from its face value if they become "Liberty Associates." Associates are offered incentives such as the opportunity to buy Liberty Dollars at a lowered price and the opportunity to sell them, in turn, for their face value in U.S. Dollars, and the ability to sign up other Associates thereby earning a referral fee from the company.

Liberty Dollars are specially-minted .999 pure silver coins and .9999 pure gold coins, as well as silver certificates and gold certificates sold as "warehouse receipts," which can be redeemed for gold and silver Liberty coins. NORFED offers another product for sale, eLibertyDollars, which are redeemable with some restrictions for the coins. The currency is not legal tender, and NORFED does not guarantee that they can be converted back into standard U.S. or world currency at par. NORFED currently sets the value of twenty Liberty Dollars at one ounce of silver, which at present, as of April 2006, has a spot value of just over $10 USD.

NORFED is headed by Bernard von NotHaus, the retired mintmaster for a private mint located in Hawaii called the Royal Hawaiian Mint, which has no connection to the Hawaiian government, despite its name. NotHaus cites a 96% loss in the value of the U.S. Dollar, based on the Consumer Price Index, as a selling point for the Liberty Dollar. Critics of the Liberty Dollar cite the fluctuation in price of silver in U.S. Dollars over the years since it began trading on the free market in the early 1970s. Since silver became a tradable commodity (i.e., listed on the COMEX along with tin, copper, gold and other metals), its price has been manipulated by such investors as the Hunt Brothers and Warren Buffet, cementing its reputation as a volatile commodity.

The United States dollar was once defined by law (see gold standard) as a specific weight of gold, and at one time certain specific types of paper money could be exchanged for gold or silver coins. This is no longer the case, but NORFED advocates a return to this policy.

Image:Liberty-dollars.gif From its inception in 1998 to November 23 2005, NORFED sold one ounce silver coins valued at ten Liberty Dollars for US$10, but on Thanksgiving Day, 2005, raised the price to US$20.

NORFED specifically does not guarantee the exchange of Liberty Dollars back to U.S. dollars, claiming that such exchanges are contrary to its goal of increasing the silver and gold in monetary circulation. Paper Liberty Dollars can be exchanged with certain restrictions for the specially minted coins.

Liberty Dollars are officially accepted in a handful of merchant locations around the country. NORFED maintains a website listing merchants who have indicated that they accept them as payment.

1 Legality
2 Security
3 Denominations
4 eLiberty Dollars
5 Criticism of Liberty Dollars
6 Differences from other alternative currencies in the United States
7 References
8 See also
9 External links

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Legality

As with all forms of private currency or corporate scrip, including air miles, acceptance of Liberty Dollars is at the discretion of the merchant, who decides how much of his goods or services to sell in return for Liberty Dollars, if he decides to accept them at all. According to NORFED, its Liberty Dollar currency was submitted to the U.S. Treasury Bureau of Engraving & Printing for review, which verified that the Liberty Dollar is not an attempt to counterfeit under 18 USC 3056.

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Security

The paper Liberty Dollars include many security features, such as holograms, microprinting, UV fluorescent ink trim, hot gold and silver foil stamping, and an invisible synthetic DNA security thread. NORFED claims that paper Liberty Dollars are more difficult to counterfeit than United States currency. Anyone familiar with the appearance of the certificates can easily spot a counterfeit, but since most U.S. citizens have never seen a Liberty Dollar, they wouldn't know what to look for.

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Denominations

$1 silver certificate (brown)
$5 silver certificate (magenta)
$10 silver certificate (blue)
$10 Silver Half Liberty (half troy oz. coin, .999 pure silver)
$10 Silver Liberty (one troy oz. coin, .999 pure silver) -- obsolete, see below
$20 silver certificate (red) -- will be introduced March 2006
$20 Silver Liberty (one troy oz. coin, .999 pure silver)
$500 gold certificate (gold and blue)
$500 Gold Liberty (one troy oz. coin, .9999 pure gold)

Since the revaluation of the Liberty Dollar on Thanksgiving Day, 2005, the old silver notes and $10 Silver Liberty are obsolete. There is a reminting fee to melt down old one-ounce $10 Silver Liberties and remint them into $20 Silver Liberties, but the paper certificates can be exchanged at no charge.

Like the euro but not the U.S. dollar, the certificates' size and color varies with the value. However, unlike the euro, only the long dimension varies, similar to Japanese Yen bills. The higher the value, the longer the certificate.

The gold and silver Liberty coins have a similar design except for particulars such as mint date and value. Because gold is denser than silver, the Gold Liberty is smaller, with about 5/6 the diameter of the silver coin. Both coins have milled edges, like on the U.S. quarter and dime, intended to discourage coin clipping.

Each piece of currency (whether paper or specie) bears, in addition to its specific weight and its denomination in Liberty Dollars, a toll-free US phone number (800-NEW-DOLLAR) and a web URL (www.libertydollar.org) intended to allow bearers to make contact with NORFED or a local Liberty Dollar representative, but the bearer will not be able to trade the currency for U.S. dollars with NORFED or its representatives.

NORFED has also issued limited-edition coins in $10-base denominations of $1, $2, $5, $20, and $50, but they are not intended to circulate and cost more per ounce of specie than the regular denominations above. These trade on markets like eBay for a high premium.

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eLiberty Dollars

eLibertyDollars (or digital Liberty Dollar) are electronic money which are intended to be used for online transactions such as eBay auctions. These are identical to Liberty Dollars except the currency exists as online trading credits rather than as paper currency. They are purchased with US dollars but can only be redeemed for Liberty Dollar silver certificates or coins.

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Criticism of Liberty Dollars

The Liberty Dollar does not have the liquidity generally associated with a currency, such as the ability to easily convert to other currencies, and the ability to deposit in savings or checking accounts in conventional banks[1].

The widest criticism of Liberty Dollars is that they are not backed with silver in an amount equivalent to the dollar-denominated face value of the currency based on current prices of silver. It is cheaper to buy silver on the market than to buy paper or electronic Liberty Dollars at face value and redeem them for Liberty Dollar coins.

A related criticism is that Liberty Dollars can only be exchanged for silver coins (currently, a 1 ounce coin per every $20 in Liberty Dollars) through NORFED or its representatives who have signed up to become associates or regional currency offices. Essentially this means that a business accepting Liberty Dollars, unable to deposit them in a bank as with U.S. Dollars, can only "cash in" Liberty Dollars by selling them on the open market. The ease and practicality of doing this depends on the ability of the merchant to locate buyers for the currency, and the availability of buyers at any point of time. NORFED encourages merchants to offer the Liberty Dollar as change to their customers, but neither NORFED nor a participating merchant can compel a buyer to accept them in change.

Since no one is required by law to accept the Liberty Dollar in any transaction, buyers and sellers might be left to haggle over every transaction.

These criticisms have been made by many who would otherwise support the idea of an alternative currency, including Carl Watner who publishes the individualist anarchist newsletter The Voluntaryist, and Las Vegas libertarian writer Vin Suprynowicz, who asserts that NORFED is a multi-level marketing system.

Some of the critics, including Watner, agree with the concept of hard money but disagree with NORFED's currency implementation. In particular, they note that NORFED's "silver base" is extremely rigid compared to the spot price of silver, and recommend instead the use of generic silver rounds as currency. Furthermore, critics assert that by stamping a dollar amount on the Silver Liberty, NORFED defeats the purpose of measuring money in terms of weights of specie. Also, the design of the piece may confuse some people into thinking that the Liberty Dollar is legal tender, and unscrupulous users may take advantage of this confusion to pass Liberty Dollars to those who don't realize that they are not getting official government currency.

While NORFED specifically points-out that Liberty Dollars are a currency, not an investment, the Liberty Dollar does not deliver to the investor as much silver per USD as buying generic silver rounds or junk silver does. Since the silver Liberty Dollar is essentially a branded silver round, it is at least as liquid as other silver rounds.

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Differences from other alternative currencies in the United States

The United States currently has a number of alternative currencies in circulation, including the NORFED Liberty Dollar, such as Phoenix Dollar, Ithaca Hours, and online currencies. Two primary differences exist between Liberty Dollars and Phoenix Dollars and most of the other alternative currencies. Liberty Dollars are backed by NORFED's promise to exchange them for silver (since they are defined in terms of silver.) Most alternative currencies in the United States are based on the Time Dollar theory: the value of the local currency is tied to a specific unit of time; the most common being currency denominated in "Hours", 1 hour = $10 USD, so it depends on people in the future willing to swap their labor time, regardless of the amount of currency issued.

The other main difference is the other currencies are intended as local currencies to be used in a specific city or region. Liberty Dollars are intended as an alternative national currency.

Liberty Dollars and the other alternative currencies all share the fact that very few businesses accept them presently, some who do accept them only accept them for partial payment. Ithaca Hours, a local currency in Ithaca, New York, have been relatively successful because one of the local banks accepts them as deposits.

There are also a number of alternative online currencies such as digital gold currency, as well as other online payment services such as PayPal, which eLiberty Dollars hopes to compete with. Primary differences are that PayPal's currency credits are convertible with actual U.S. Dollars which can be charged to a credit card or deposited in a bank account. e-gold exchanges gold, silver, and other precious metals, and can be redeemed through various online services at the actual spot price of the metal. eLiberty Dollars can be redeemed for silver rounds or for paper Liberty Dollars at rates set by NORFED, currently one silver round for twenty eLiberty Dollars.

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