The Liberty Dollar - Inflation Proof Coins and Currency

jsharp

When a member of a Yahoo Coin group asked for identification on a coin, the search turned up a very disturbing website.

The Liberty Dollar- Inflation Proof Currency since 1998

I have not searched their website very deeply yet, but I find it very disturbing.

The following is from their homepage: "The Federal Reserve manipulates U.S. currency, interest rates, and inflation for the advantage of its owners. Since 1998, NORFED has provided an alternative: The Liberty Dollar - inflation-proof currency owned by the people, not the Federal Reserve."

It goes on to state: "It's real money! It's better than Federal Reserve Notes! Just as FedEx brought competition to and improved the U.S. Postal Service, NORFED brings competition to America's most basic monetary unit, its currency. NORFED, a national non-profit organization, offers a simple and legal solution to the problem of the Federal Reserve's inflationary currency: Stop using their money. Start using The Liberty Dollar and return America to value - one dollar at a time."

A member of the Yahoo group posted the following after reading about Norfed: "The more I look into this organization, the more concerned I become. They claim that the American Dollar is worthless, yet they accept it at a one to one ratio. They accept credit cards also. They charge you $10 plus shipping for 1 ounce of Silver. The American Liberty currency is claimed to be inflation proof. The inflation is already built in, $10 for Silver that is worth about $5.

Very few places accept Liberty Dollar. In order to become a 'redemption center', you have to pay a fee of $50. This is for the privilege of using their money. So now you have Liberty Dollars and permission to redemption, try to spend them elsewhere. In order for a new currency to work it must have something to back it up and be an accepted form of trade/exchange. The exchange is only one way, from American Dollars to Liberty dollars. They will not exchange your Liberties back to Dollars."

Have any of you ever encountered any of these coins?

What are your thoughts?

John

shortdj

Veddy intderesttink! But stupit! (from Rowan & Martin's Laugh-in). I read the info from your link and actually and really found it interesting that it CLAIMS it is LEGAL to circulate this kind of currency and coinage. It does sound to me that the only people that are going to get rich on this is the people at NORFED. They are making $50 from you signing up and they are making whatever profit is minus silver spot and cost of coining (not even going into the currency aspect of this). Lets say it costs $1.00 per coin to make plus the cost of silver so $5.88 per coin....then they sell it to you for $10...sounds like a good profit margin to me. But if you become a RC (redemption center) you get to buy yours for $7.50 and the value becomes $10----you sell them for $10 and make $2.50 per. I just don't see any retailers or merchants who would want to take $5 worth of silver for $10 face value. You really have to go to the link and read it ALL to get the summation of all of this, so I'll just stop here by saying I don't think it's legal and that it will not work. But I could be wrong as I've never gotten in on the ground floor of anything that was going to actually MAKE me some money. I only bought 2 Buffalo Dollars for my collection and none for profit taking, so I missed out there too. I also have not seen any retailers with this type of "money"....but then again, I have yet to see very many retailers with SAC DOLLARS, and they ARE legal and supposedly more plentiful.

Not going to even get further into the legalities of eroding the U.S. economy by putting in this money into our system. Wow...this is big (IMO) whether it is legal or not.....whew!!!!!

jtryka

I don't think there is anything illegal about this, small towns and companies have been using script since the colonial days, and that's all this really is. As far as the profit for Norfed, that's no different than what the Federal Reserve does, last I checked, there was about 6 cents worth of paper and ink in every FRN, whether it's a $1 or $100, and about 25 cents worth of manganese and brass in a Sacagawea. I have seen this site before, and was tempted to get one, just as a souvenir. If you want real inflation proof currency, just buy American Eagles, or classis US gold and silver coins. If the apocolypse happens, those will be worth a heck of a lot more than Liberty notes!

cladking

Scrip is used in a small area and a closed system. This is purported to be
currency. Hard to believe they've lasted this long.

jtryka

redemption centers? sounds like a closed system to me. Not sure about the scrip small area rule, military scrip was used in a wide area.

jsharp

jtryka, how can this system be legal?

I consider it fraud to walk into the local grocery store and tell some clerk that the "liberty coin" is worth $10.

I am sure that there are laws against "passing" coins by presenting them as legal currency.

If this local grocery cannot take them to any bank and ask for $10 in U.S. currency, then fraud has been commited.

John

Conder101

I consider it fraud to walk into the local grocery store and tell some clerk that the "liberty coin" is worth $10.

Why? He says his steaks are $5 a lb. You can say something is worth any amount. If the grocer doesn't agree then there is no deal. The grocer doesn't have to accept the Liberty coin for his wares.


I am sure that there are laws against "passing" coins by presenting them as legal currency.

If you state they are legal tender then you are right but to just offer them in exchange at a certain rate, no that is legal.

If this local grocery cannot take them to any bank and ask for $10 in U.S. currency, then fraud has been commited.

You can't take your groceries to the bank and get $10 in US currency for them either. Have you been defrauded? Probably not. Each of you have just exchanged one item for another at an agreed upon rate.

jsharp

Conder101

Points well taken, I cannot disagree with what you said. If two parties agree on the value of an item, it is a deal between the two of them.

At the same time, I can see tons of confusion arising over these coins being used in the everyday marketplace.

When first asked about this coin, the person who was interested in buying one was under the impression that it was a U.S. Mint coin.
Likewise, I know a guy at the local convenience store who swears his brother got a U.S. mint $5 silver coin from the local bank. I kept asking him to bring it to show, but his brother "sold" it before I got a chance to see the coin.

First off, I would think it would be difficult to get anybody to accept these coins, as sometimes I have a hard time using Sacagawea Dollars and Kennedy Halves. The general public is not too bright sometimes when it comes to our nations coins.

Now with the release of the new dollar, it seems logical that many young cashiers may simply assume the coins are U.S. Mint coins.

I must ask, are you in favor of groups such as this printing their own currency and minting their own coins?

John

jtryka

I would look at this like any other currency. You can privately produce currency, in fact most of us do it every day, it's called a personal check (included in M1 to give added credibility to my argument). Unfortunately, not every check is valued at par with US dollars, as is the case with people who write bad checks, or with non-local checks (I usually hold checks 10 days on eBay, especially if they are drawn on east coast banks). It's also helpful to look at foreign currency exchange rates as well. Under the gold standard, a British pound was worth about $4.80, why? Because the Brits were so much better than Americans? Nope, just because of the weight of gold they chose to back the pound (a gold sovereign worth 1 pound was just a little smaller than a half eagle). Now, it's based on interest rate parity, purchasing power parity, and the levels of demand for the currency relative to other currencies due to current account surplus/deficit, trade imbalances, etc. We now have a floating rate system where none of the currencies are backed by anything, this is why banks no longer hand out silver coins at face, and why you can't get a St. Gaudens from the Fed in exchange for a $20 bill (remember, the silver in a dollar's face value in 90% silver coins was worth less than a dollar until the 1960s, and no one cried bloody murder). The same is true for these liberty dollars. If I remember correctly, at the "redemption" centers, you can redeem your $10 liberty note for either $10 US, or an ounce of silver. Well, today you'd be foolish to take the silver, but in 1980, you'd be foolish to take the greenbacks. Most of us who work in finance see the currency exchange issues, and view this as a novelty. For the majority of the public who look at you funny when you spend a $2 bill or Kennedy, it's a massive fradulent conspiracy. Will this ever work? I doubt it, but I think this group is more concerned with raising public awareness of the dangers of the current system rather than making a functional currency to compete with the paper dollar. And they have a point. Ask some of your non-numismatist friends, and I bet 8 out of 10 will tell you that the dollar is still backed by gold or silver. If it was, a Coke would still cost a nickel.

cladking

There's not nearly enough gold and silver to back the currency for a coke to cost
a nickel. They would probably cost about an eight of a cent unless we were still
in the depression caused by a money shortage( in which case they could be much
cheaper). A small area and closed system is the rational behind the demonetization
of the states sales tax tokens back in the 30's. These had been issued to make
change for a cent when sales tax was less than a cent. The courts and secret service
shut them down because they weren't circulating in a limited area or a closed system.

jtryka

Clad,

There really doesn't need to be enough gold to cover the currency, it's just a method of controlling the value of the dollar. If you peg gold at $20.67 per ounce, or any other price you choose, the treasury would just buy gold for dollars if the price fell below the peg, or sell gold if the price rose above the peg. The vast majority of the currency would never actually be converted to gold (we can't even get people to spend Sacagaweas, I doubt they'll start spending double eagles if that were possible. It's just a method for discipline on the currency.

cladking

Quite true, but I'm not sure how much difference there is between constantly
decreasing the amount of gold backing to the dollar or issuing increasing amounts
of a truly fiat currency.

jtryka

Clad,

I think I wasn't quite clear on the process. The amount of gold would stay constant under the system. The buying and selling would ensure that the price remains constant, i.e. the market price would always equal the pegged price. If the peg was $20.67 per ounce, and the market price moved to $22 per ounce, the treasury would start selling gold, that selling in the market would drive the market price down, back to the peg price. If the price dropped to $19, then the treasury would start buying, and the additional demand from the treasury would cause the price to go back up to the peg price. The Fed does the same thing today with treasury bonds, when they want to add currency to the system, they buy bonds, when they want to remove liquidity, they sell bonds. It's just a little messier, and it's why inflation will always exist under the current system. In the old days, the system worked a little differently in that the government always stood ready to redeem the notes for gold and vice versa, so there was never any reason for the market price to fluctuate that much, why would anyone pay $22 an ounce in the market when they could just take $20.67 to the treasury and get an ounce of gold? And why would anyone sell at $19 when they can get $20.67 from the treasury? In any case, the peg remained the same for quite a while, from the 1840s until FDR in 1933.

PS-A can of Coke costs about $0.75 today. Under the old gold standard, $20.67/$305 (today's price) x $0.75 = $0.05083 in gold.

jsharp

If I remember correctly, at the "redemption" centers, you can redeem your $10 liberty note for either $10 US, or an ounce of silver.

This is not true. You cannot redeem the liberty coins and currency for U.S. currency.

If the founder of this group feels so strongly about this great currency, why do they accept U.S. currency when buying them? Their website states: Redemption Centers (RCs) make money by exchanging fiat government money for gold and silver money, placing The Liberty Dollar into circulation. RCs educate, evangelize, and support The Liberty Dollar by using the new currency in everyday transactions. RCs get the round, coin-like, one ounce Gold and Silver Libertys at greatly discounted prices. For instance, as an RC you can get 100 Silver Libertys (face value: $10.00) for only $7.50 each. Every time you use or exchange a Silver Liberty at its face value of $10.00, you reclaim that discount of $2.50 and make 25% on your money. And if you purchase in greater quantities, you can get Libertys for even less than $7.50 each - sometimes as low as $6.00 a piece, depending on silver's market price!

Do you think they would give me an additional 100 silver libertys at $7.50 each if I offered to pay for them with $75 in Liberty Dollars? I doubt it.

From July 2nd article in Austin Statesman: So what happens after the Liberty dollar hits the register till? Not much. Will a bank take them in the commercial lane? No. What's a merchant to do? NORFED redemption centers are located around the country, but the organization says they are not obligated to exchange Liberty dollars for Federal Reserve notes or silver.

The American Liberty money is supported by silver and gold, with $10 worth one Troy ounce of .999 fine silver. I would like to know how many ounces of silver you are willing to buy at $10 per ounce. Personally, I will use U.S. Dollars and get it much cheaper.

John

jtryka

Well, that is interesting, it seems that Norfed is attempting to capture the seignorige (not sure of the spelling there) on the "currency" they are issuing. If anyone would accept them, they shouldn't do it at par, but at the current exchange rate which would be about $0.46 US per $1 Liberty. If that happened, the redemption centers and Norfed would be hurting. Just like stores near the US/Canadian border that accept both currencies. Do you suppose that the stores on the US side take Canadian dollars at par? Not likely, though I'm sure the reverse would be true on the Canadian side. Suppose these Liberty Dollars were backed by gold instead, and the price was set a year ago when gold was $275 per ounce. Would you feel any differently about these liberty dollars? It may be a fraud, but I am certain it is not nearly as big a fraud as the National Collectors Mint selling silver plated 1889-CC Morgan replicas for $19.95 a piece on national television!

jsharp

I am in complete agreement with you.

I would love to have a ton of these coins in stock prior to the price of silver skyrocketing to $20 per ounce, (which will probably not happen). I am sure that the Non-profit organization backing these dollars would be running for cover.

I agree upon their idea, but given that they cannot stabilize the price of silver, they are on dangerous ground.

I have read many more articles on their website, and apparently the government has already stated that their "barter system" is not illegal. As long as they can dupe people into accepting the coins and currency, they will continue to line their pockets. Ironically, they are lining their pockets with U.S. Dollars in the process.

John

jtryka

It is ironic, but what is also ironic is that the news article you mentioned didn't seem to complain that the US Dollar (or four quarters, ten dimes, two halves etc.) only contain about 20 cents worth of copper and nickel! How unfair! The only difference is that people believe in the dollar, and accept them widely. The same would be true if a wide group of people believed in the Liberty dollar and they became widely accepted, then no one would really care that they are only worth 46 cents in silver. In fact throughout our history, only gold coins contained the exact amount of metal as face value (a $20 gold piece had 0.9675 ounces, the official price was $20.67 per ounce, so $20.67 X 0.9675 = $20.00). The value of silver and copper fluctuated too much for that to be true. In fact, I think it's a mistake to peg to silver since it is so widely used in industry. In that case, if there is a recession, the value of silver drops due to slower industrial demand, and that would cause the value of the dollar to drop leading to higher prices and high inflation even though the economy was slow. That's what we had in the Carter years! Who would want that? A silver standard may be a step up from starting up the presses in a fiat currency system, but it's not a big step up!

cladking

The quantity of gold in the world has not grown nearly as much since 1971
as the total amount of wealth so the same amount of gold today "represents"
a lot more "money". Anything the government could do to affect this relation-
ship would damage either the economy or the currency.

jtryka

Clad,

I agree with you on the level of wealth, but if gold were used as money, it would just be a different measure of that same wealth. Whether my net worth is $1 million, or 660,000 British pounds, or 1.5 trillion Turkish Lira, or 3,278 ounces of gold, my wealth is exactly the same. If you are implying that inflationary currency policies create wealth, I could not disagree with you more. If anything, inflationary policies do nothing but destroy wealth.

Tarmac

Never heard of these until today when a coworker gave me 10 of the coins as payment. How strange and interesting at the same time! Apparently there is about $20mil in circulation of these but it took 8 years to get one into my hands!

shirohniichan

Right now they're a good deal, but NORFED will probably start issuing 1/2 oz $10 silver coins soon.

As long as silver stays anywhere above or near $10 per ounce, you won't see the Liberty coins circulating.

kwmorgan

If a $20 (1 troy oz silver) Liberty dollar piece were presented to me for payment, I would accept it at the current exchange rate for silver which at this moment is around $12.15. Silver and gold are now no different than any other foreign currencies, in that their values "float" against the US Federal Reserve dollar. For fun, calculate the value of the silver in a silver dollar. It now takes around $10 Federal Reserve dollars to buy what used to be one US dollar. 10 to 1, much like the exchange rate between the Mexican peso and Fed dollar. Welcome to the American peso.

BlindedByEgo

I read an article a couple of months back where 2 people were convicted of fraud for passing these. Not by the feds, oddly enough - it was prosecuted at the state level and based on misrepresentation (as I recall).

At the right price, I could see these circulating - Gresham's Law and all - but I don't know that leaving the disbasementy of a currency system should be left to a private enterprise. This should be the sole domain of govenments - they seem to do it so well (and almost painlessly).