Liberty dollar
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The Liberty Dollar is an alternative form of currency issued in the United States by NORFED, a non-profit organization based in Evansville, Indiana. The paper currency is backed by precious metal (silver and gold bullion) and is redeemable when presented at a NORFED Regional Currency Office. The coin currency is minted from pure silver or gold.
NORFED stands for National Organization for the Repeal of the Federal Reserve Act, whose stated goal is to encourage use of the Liberty currency and to highlight the fallacies of the U.S. Federal Reserve "fiat currency."
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Legality
Just as many states, banks, and local communities once issued their own currency in the past, the Liberty dollar is a legal form of currency and is not considered counterfeit by the U.S. Government. According to NORFED, the currency was submitted to the U.S. Treasury Bureau of Engraving & Printing for review, which verified the legal legitimacy of the currency.
Concept
The Liberty currency is designed to be interchangeable on a $1 to $1 basis with Federal Reserve notes while remaining backed by a fixed amount of silver or gold. This is designed to overcome the loss of purchasing power that occurs when you hold money in a fiat currency like the Federal Reserve note. The holder of a one ounce Silver American Liberty coin retains the purchasing power of an ounce of silver even if, sometime in the future, the Federal Reserve Dollar has dropped in value to the point where it would cost twice as much (or more) to purchase that same ounce of silver. The currency is produced in coinage, paper currency, and electronic forms.
Security
Liberty silver and gold coins are minted from .999 pure silver, or .9999 pure gold. Modern security features are built-in to Liberty paper currency, including holograms, microprinting, hot gold or silver foil stamping and an invisible synthetic DNA security thread. Anyone familiar with the appearance of the certificates can easily spot a counterfeit.
Denominations
Liberty currency occurs as precious metal coins and paper certificates. The denominations are listed below:
- $1 silver certificate (brown)
- $5 silver certificate (magenta)
- $10 silver certificate (blue)
- $10 one-ounce silver coin
- $500 gold certificate (gold and blue)
- $500 one-ounce gold coin
One feature that Liberty currency shares with the euro but not with the U.S. dollar is that the certificates' size and color varies with the value. However, unlike the euro, it's only the long dimension which varies. The higher the value, the longer the certificate. The two denominations of coins have an identical design except for particulars such as mint date and value. Because gold is denser than silver, the gold coin is smaller, with about 5/6 the diameter of the silver coin.
One might note that the face value of the pieces is larger than the spot silver or gold price. The extra cost is here used to buy more silver and gold to back more certificates and make more pieces, as well as for storage, shipping, insurance, and other costs. While normally this would be an extra numismatic value, this mismatch presents a potential vulnerability of the currency, since numismatic value decreases with the increase of the amount of currency in circulation. Please remember that the spot price of silver you see in the paper is for a 5000 ounce ingot in New York. Never confuse "bulk material costs" with "manufactured goods price". Just as you can't buy a loaf of bread for the 8-10 cents worth of wheat, you can't get a $10 Silver Liberty or Silver Certificate at the spot price of silver. A $2.00 loaf of bread has less than 1/20th bulk material costs. While a $10 Silver Liberty or Certificate with silver spot at $5.00 per ounce has only 1/2 bulk material cost! The $500 gold coin is an even better investment in this regard, since the spot price of gold is about $425, which is 85% bulk material cost.
It might also be noted that the 1 oz. Silver Eagles ($10.50 to $11 on June 12, 2005) minted by the Federal Government cost the same amount or more than 1 oz. Liberty Dollars ($10 on June 12, 2005) while containing that same amount of silver. Also of note, the US Silver Eagles have a face value of $1 which is less than the value of the silver contained in the coin and also makes the Silver Eagle more difficult to use for transactions with merchants.
How the Liberty Dollar retains it's value against inflation
The flexibility of the Liberty Dollar to remain backed by precious metals, yet be interchangeable on a $1 to $1 basis with Federal Reserve notes is achieved as follows: Silver or gold coins are minted with a face value slightly above the value of the metal itself, currently $10 per troy ounce of silver, or $500 per troy ounce of gold. As the value of Federal Reserve notes decline sufficiently, due to inflation, the coins are revalued (face value doubled) to maintain their 1:1 valuation with US Federal Reserve Note. Likewise, a holder of the silver or gold certificates may exchange them for new certificates with twice the dollar value. The terminology used by NORFED to describe this is the "base". Currently the Silver backed curencies have a "$10 base", that is, they are valued at $10FRN per troy ounce of silver. The gold backed currencies have a "$500 base".
Liberty Dollars in the marketplace
NORFED maintains a list of merchants who specifically accept the Liberty dollar, additionally, the organization encourages the tendering of Liberty currency for all purchases. A surprisingly high number of merchants will accept Liberty coinage without realizing the money is not produced by the Federal Reserve. Undoubtedly, these merchants may experience problems with their bank rejecting the coinage for deposit. All businesses are encouraged to tender the currency back out to customers to keep it in circulation. Merchants who regularly do business in American Liberty Dollars can exchange excess Liberty Dollars for Federal Reserve notes through their local NORFED Regional Currency Office. A few merchants, however, train cashiers to not accept American Liberty currency, primarily due to the Liberty dollar's limited circulation. The full retail reaction to the currency remains to be seen.
Usage
According to estimates by the currency's founder Bernard von NotHaus, currently, over 100,000 people are using $10 million in Liberty Dollars.
See also
External links
- NORFED (http://www.libertydollar.org)