In 1789, the Constitution of the United States was ratified by
the original thirteen states. Hooray! A new country had been born.
And what does every self-respecting country need? Why, its own
money, of course. When you go to the tavern for a brewski after
a hard day of nation building, you'd like to pay with something
that reminds you of what you've accomplished.
It was especially important because England had forbade the minting
of coins in the colonies, so some coins that said UNITED STATES OF AMERICA
on the back would really drive home the point that things had changed.
On the other hand, you didn't want to confuse the situation too much,
bearing in mind that everybody already had some kind of coins jingling
in their purse. And what were they? They were likely Spanish Milled Dollars
(or halves, quarters or eighths of one; the coins, with a value of
eight reales, were often literally chopped into bits so as to be
useful to pay smaller debts. A wedge of one eighth of the whole was
one bit, making two bits a quarter.)
Minted in many Central and South American Spanish colonies, the
Dollar had been in wide circulation in the colonies for many years.
The new Congress decided to make it the basis for the US dollar.
With the Constitution giving them the power to coin money, and remembering
the disasters of the money issued by the Continental Congress which
had been inflated away, they passed the Coinage Act of 1792. Having
sampled many Spanish Milled Dollars, they in that legislation defined
the US dollar to be equivalent to 371.25 grains of silver, and declared the
dollar as the money of account of the United States. While they were
a day late, passing the bill on April 2, they threw in a joke at the
end, Section 19 of the law, establishing the death penalty
for debasing the coins produced by the new Mint.
That's why those dollars in your pocket contain about three quarters
of an ounce of silver.
What? Oh, you've got the paper dollars. The ones that say "redeemable
upon demand by the bearer for one dollar in silver".
Oh, that's right; they stopped saying that decades ago. Oh dear, what
do you have in your pocket?
You've got Federal Reserve Notes. A representation
of debt owed to the Federal Reserve. And I'll bet you thought you had money.
Let me check what's in my pockets: in the right I have 6 debased dismes
and one Silver Liberty with a face value of 10 dollars. In the left are one
Federal Reserve Note with a face value of 10 dollars, and four more with
a face value of one dollar. They carry no explanation of what that means
or what I can do with them. Let's see, there are also two pinkish and four
brownish fancy looking pieces of paper that say American Liberty Currency.
The pink ones say 5 Dollars in the corner, the others say 1 Dollar, and
all say REDEEMABLE BY BEARER ON DEMAND at the bottom. Writing in
the middle informs me that these are receipts for silver stored
in a warehouse in Coer d' Alene, Idaho, and on the back are instructions
for how to redeem them.
The five dollar silver certificates have a large overprint on the back
saying 1/2 OUNCE while the 1s say 1/10 ounce.
Well, that jives with the silver Liberty in my right pocket, which is one
ounce of pure silver.
So, what are they, and where do they come from? The Liberty Dollar is the
brainchild of Bernard von NotHaus, who in 1998 created the system after
years of thinking on the question of how a private currency could be
introduced alongside what we're using now, and gradually supplant it.
He founded NORFED, the National Organization to Repeal the Federal Reserve
Act, which is the distributor of new Liberty Dollars in its specie, warehouse
receipt, and digital warehouse receipt forms.
The silver is stored in a
bonded warehouse in Idaho, and receipts are issued by the warehouse to
NORFED as silver is bailed in. Each ten dollars of Liberty Currency is
backed by one ounce of silver. The specie, of course, is not backed by
silver because it is silver. The receipts and specie are then
sold by NORFED and thus start their way into general circulation. Well,
not so general :), since most people have never seen or heard of them.
But in some towns, especially in the South, virtually everybody in town
accepts them (merchants for service and merchandise, customers as change
from their purchase.) In each city, it started with one person spending
them, and it snowballed (or didn't) from there.
What would make a person attempt to introduce a new currency when everybody
already uses the "standard" one? Two things: first, of course, he probably
understands the importance of sound money and the damage that has been
wreaked upon the United States since we stopped using it. Second, …
profit! An incentive to spend the money into circulation is that if you
become a Liberty Associate, you can buy the money from NORFED at a discount.
Liberty Associate? What's that? That's part of the genius of the system
that LibertyDollar.org set up. In addition to having Alice buying Liberty
Dollars and spending them, you also want her to get her friend Bob in on
the act. Bob becomes a Liberty Associate by sending US$250 to NORFED. For this
he receives one hundred Liberty Dollars, a bunch of educational and
promotional materials, and the right to buy Libertys at the Liberty Associate
price. What about the other hundred fifty dollars? Fifty dollars goes to
NORFED to support their operations, and a hundred dollars goes to Alice,
the Associate who referred him. So Liberty Associates have great incentive
both to spend the money into circulation and to get more people to do so.
And never fear, it's not MLM or a Ponzi Scheme.
Alice may refer as many new Associates as she can, receiving a hundred
dollars each time, but she gets nothing when Bob or Bill refer their own.
And the referral bounty comes right out of the fee paid by the new associate,
so there'll never be a problem there.
The big problem everybody realizes is that the US dollar loses value
pretty much continuously, while silver pretty much doesn't. A ten dollar
Liberty that's on par with ten US dollars today should be worth more five
years from now. Bernard built in a way to accomodate that. In one corner
of the receipts is a hologram that says $10 Silver Base.
That indicates that it was issued when a one ounce Liberty was worth ten
dollars. In accordance with a function of a moving average of the US dollar
price of silver, the silver base may change. At some point it will probably
change to a $20 Silver Base. At that point, newly minted silver Libertys
will have a face value of $20. Newly issued ten dollar silver certificates
will be redeemable for half an ounce of silver, and the hologram will indicate
the $20 Silver Base. Does that sound like inflation? My original ten dollar
certificates were receipts for a full ounce of silver! But of course, they will
no longer spend on par with 10 US dollars, people will demand 20 dollars for
them. But to make it simpler, a LD$10 certificate with a $10 Silver Base can
then be redeemed at no cost for a LD$20 certificate with a $20 Silver Base.
Because they're of equal value, each being backed by one ounce of silver in
the warehouse. The backing and redeemability of certificates are not affected
by changes in the silver base.
The Liberty Dollar. Sound money. Inflation-proof. And each one that enters
circulation is another small bite taken out of the control that the Federal
Reserve has over us. And that's happened over five million times so far.
P.S. I told you what I have in my pockets. On my desk is an illustration of
what happens when people lose confidence in their fiat currency. I have
a one thousand Reichsmark note printed in Germany in 1922. A thousand marks
was a goodly amount of money. I have another Reichsbank note, printed in 1923.
Its face value is 500 million marks. Sound, commodity-backed money will
never cause its owner to see his entire life's savings burned in an evening
just to keep warm.
Sorry, folks, I'm impelled to add more after reading the writeup following
this one, which raises some points that mine does not address. (Some of these statements have since been revised in the other writeup.)
Why should I pay US$10 for a certificate redeemable for 1 ounce of silver
… which is, as of this writing, worth US$6.72
very simple. Regardless what your broker says or what you read on the web,
you cannot buy an ounce of silver for $6.72. That is what is called the
spot price; for silver, spot is the price of a five-thousand
ounce bar of silver delivered in New York. Anything less than that bar
and the price goes up. Several months ago, when silver took a plunge, I
bought a one-thousand ounce bar. Spot was $5.84, and I paid $6.66. (I
could have paid $6.62 at a different merchant.) You can look up the spot
price of orange juice also, but don't expect to be able to buy it for that
at the grocery.
The Liberty Dollar is a currency, not an investment, and the intrinsic value
of a currency is always less than its face value. Think about it:
if you have a coin in your pocket that says One Dollar, but the material it's
made of is worth two dollars, why in the world would you spend it? In fact,
the United States Mint does make a silver coin with a face value of one
dollar; it's called the Silver Eagle. It contains one ounce of silver (same
as the Liberty Dollar LD10 specie) and you can buy one for around nine
dollars. You've never gotten one in change from a store, because nobody
has ever spent one. The face value must be higher.
And, because the Liberty Dollar trades at par with Federal Reserve Notes
(otherwise it would never have achieved the usage it has), the silver specie
must have the same face value. If NORFED said "We can recover our cost and
run our organization and still sell one ounce of silver for nine dollars"
and ran out and minted LD9 specie, how well do you think that would have
NORFED is a business, … needs to make a profit … 33%
original exchange fee
NORFED is a non-profit organization. From the previous point, you can
see that the 33% figure is based on an irrelevant number. The actual
"profit" to NORFED is much smaller than that. (I don't know the actual
And if you want to talk about original exchange margins, think for a moment
about a US$100 "bill", which costs about four cents to print. That's a two
hundred fifty thousand percent markup, if my math is right. Why do you not
complain about that? Good thing they don't make $500 or $1000 bills anymore,
since it would cost exactly the same to print them as it does to print a $1.
Further, if NORFED goes bankrupt, they say you'll still
be able to trade in your paper LDs for silver and gold. While I'm sure that's
true, I can guarantee you they won't be worth what you paid for them. So much
NORFED's solvency is irrelevant (at least to the question of redemption)
because the silver and gold backing the receipts is neither owned by them
nor in their custody. It's owned by the person holding the receipt, and is in
the custody of a bonded, insured warehouse, in accordance with the Uniform
Commercial Code. The point, as isogolem is well aware, is that the
receipt is redeemable for exactly what it says, and the government will
enforce that redemption at the bearer's demand, unlike their own receipts
that they used to issue, which they simply repudiated. That's the advantage
of being the government, you can do that. At least until the people won't
stand for it anymore.
As far as your "guarantee", I'll make one of my own: I guarantee that the
$10 bill you receive today is not worth what the one you got a year ago was.
Even though they're of "equal value".
only two things control the exchange rate of Liberty Dollars to other currency
and back: on the low end, they must be worth at least value of their backing
(which has fluctuated widely in the last 15 years), but on the high end, NORFED
can charge whatever they want for them
NORFED cannot charge whatever they want for them (and get it). An absolute upper limit is
obviously the face value. NORFED also mints LD1 and LD5 specie (which, in
accordance with the LD10 silver ounce, are one tenth and one half ounce
of silver respectively, as opposed to Federal Reserve Notes which are all identical).
Because of the realities inherent in my first point
above, they have a list price well in excess of their face value. It costs
NORFED more than a dollar to mint a one-tenth ounce Silver Liberty, and it's
priced at two dollars. Surprise, nobody buys them, despite that everybody would like to
have specie smaller than the full ounce.
If the US Dollar goes into a tailspin, … , the question foremost on your mind won't
be where to go to redeem your Liberty Dollars.
If? The US Dollar has been in a tailspin for
decades; relative to its value in 1913 or 1933 or whenever you want
to count from, it has very nearly hit the ground already.
As isogolem said above, gold and silver make great money. Which is why
people used it for years. If the world financial system collapses, people
who have it will be very glad that they do. In that case, of course, it
will no doubt be better to have specie LDs rather than receipts.
In fact, the receipt will be worth as much to you as the ounce of gold itself, because you can't make clothing, food, or shelter out of either of them.
That is just an unbelievably ignorant statement. Yes, you can't eat gold; you can't wear LD receipts (though it was popular to make clothing of Continentals as they become more and more worthless); and you can't build a house out of Federal Reserve Notes. That is not at all the same as saying that money will disappear if the US dollar becomes worthless. People will continue to trade, and most likely gold and silver will be a preferred medium, as they were for thousands of years before the US dollar came on the scene.
Wow, I didn't mean to go off at such length :)