The Liberty Dollar Seizure
The big news for those interested in libertarianism and monetary systems over the last day has been the fed’s seizure of materials and metals related to the sale, production, marketing, and other business activities of the Liberty Dollar. Last night co-contributor tarran posted a very interesting piece related to the government’s tactics and rationale for going after the Liberty Dollar. I am not a lawyer, and cannot speak to that aspect (although I understand Doug is working on it), but there are some very interesting things when you look into it.
Is the Liberty Dollar (ALD) a competing currency? Or is it a scam designed to fill its creators’ pockets while suckering us into buying silver at inflated prices? The best place to understand what is happening is the full seizure warrant.
Looking over the full document, I can see where there might be some standing for a case against the Liberty Dollar*. I’ve never understood the difference between the “face value” of their currency and the US Dollar. For example, they suggest buying the Liberty Dollar $20 piece at a discount and “spending” it as if it is worth $20, when the silver inside is not worth $20. The feds refer to it as a MLM scheme, and through reading their case, I can see where they may have a point there.
As a second point, it does appear that in many ways the Liberty Dollar folks are violating the law against coining your own currency in metal. I consider it to be an improper law, and I don’t begrudge them for breaking it, but it does appear to be illegal.
Of course, none of this in any way should be understood as me being a supporter of the Fed’s system**. I believe strongly in competing market-created currencies.
It does seem, though, that the Liberty Dollar was created to secure profit for its creators from the US Dollar, instead of being a true alternate currency. The “convertability” and desire that merchants give Liberty Dollars as change, as well as the “move-up” process described in the Fed’s case belie a desire by the Liberty Dollar folks to sell silver in exchange for FRN’s at a consistent profit compared with the market price, cloaked in the language of undermining the current system.
For the Liberty Dollar to be a true competing currency, it should not be assumed as a “stand-in” for FRN’s at the same face value, which is what the Liberty Dollar proponents are suggesting. If anything, the cost of converting from FRN’s to ALD’s should be set by a market-based exchange rate, not by NORFED. It is here that I believe the fraud may be found.
As an example of a competing “currency”, my father is a self-employed architect and a member of a bartering group in the Chicago area. The bartering group acts more as a network of producers than anything else, but instead of bartering services directly, they have a system of trade “credits” tracked by the barter service itself. Thus, he can design a home addition in exchange for “trade dollars”, and then use those “trade dollars” at another business within the network.
This differs from the ALD in that trade dollars are expected to only be accepted by businesses who are members of the trade exchange, and are not interchangeable with FRN’s. Thus, much like competing national currencies, a business can accept FRN’s and also accept trade dollars, but their prices for a good or service might be substantially different based on the currency used. If a member of the exchange wanted to divest of their trade dollar holdings by selling them, the exchange rate would be determined by buyer and seller, establishing a market price, rather than a rate demanded by the trade group itself (which is what the ALD attempts to do). When it comes to getting the best possible rate of exchange, it’s worth knowing that transferwise is one of the better alternatives on offer that provide online transfer services.
A competing currency must not be interchangeable with FRN’s, which is the fiction that the Liberty Dollar creators try to uphold. Thus, the ALD becomes a method for them to sell silver at a profit while their associates or merchants work to defraud businesses by offering silver worth less (in FRN terms) for goods that are priced in FRN terms. At each level, it appears to have a cut of profit, as all multi-level marketing schemes do, and at the bottom of the scale, those who receive ALD’s as a “face value” equivalent to FRN’s are being shafted.
The Liberty Dollar does not seem to live up to what is bills itself as. If it were a true competing currency, merchants would price goods in ALD terms higher than in FRN terms, in order to receive identical value for their wares. If it were a true competing currency, the “exchange rate” between ALD’s and FRN’s would float, rather than be defined by the Liberty Dollar creators. I previously have written favorably about the Liberty Dollar, but given new information, I have changed my mind. It does not fit the bill of an alternative currency; it is a scam.
* PS – Please note, that by “standing for a case” I cannot speak as to whether the specific charges the government is leveling are proper, a question tarran brought up. My specific point is the question of whether what the Liberty Dollar creators are acting unethically or fraudulently, and I believe that by offering the currency as a face-value to face-value replacement for the FRN, they are acting to scam us.
** PS#2 – I refer to the Liberty Dollar as a scam. However, the Federal Reserve is also a scam, on which is propped up by the use of government force. I have at many times on this blog explained the many ways that I hate the Federal Reserve and our nation’s fiat money. I have further explained that I believe it is leading America to financial ruin. My criticism of the ALD should not be taken in any way as an endorsement of the current system, which is an even worse scam than the ALD.