I was disturbed to see that the Treasury Department moved against the
Liberty Dollar last Thursday. The way in which they did this is
chilling and, I think, constitutes a noteworthy step in the process of
cracking down on American's ownership of non-dollar financial assets.
I have unique knowledge of the law that Treasury cited as its
justification, and wanted to write to you with some analysis for MIDAS.
The Liberty Dollar is a privately-minted silver currency, essentially
the free-market reincarnation of the old silver dollar and silver
certificate. It circulates in both coin and in warehouse receipts. The
money has a Statue of Liberty on it, but looks unlike any current U.S.
Money. It is not "legal tender" (i.e. people cannot be required to
take it and banks do not accept it), but has been considered to be
legal for voluntary private transactions between individuals. During
its 8-year existence, many officials from the Treasury, the Federal
Reserve, and the Secret Service have all noted that, while not legal
tender, it was not itself illegal.
On Thurday 9/14, the United States Mint declared the Liberty Dollar
illegal in a press release on their website, citing as their
justification a counterfeiting law (18 USC 486). The story was covered
in a USA Today article, both attached.The most immediately disturbing aspect of this affair is that the
Treasury Department is an arm of the Executive Branch; it is charged
with enforcing law, not making law or interpreting law.[/b
] ( le trésor se substitue à la justice pour juger de ce qui est illégal ou non )
It is not the
role of the Treasury to "declare something illegal"; that is, on its
face, a sign that the separation of powers is decaying. Treasury
claims to have discussed the issue with prosecutors at the Justice
Department - also an arm of the Executive Branch. Executive and
Executive have gotten together and decided to ban private money,
disregarding long-established positions of the courts and the
legislature.[b]Another disturbing aspect is the "legislation by press release".
( ça c'est en effet tres fort de café ... un soit disant arreté ,communiqué par seule voix de presse !! )
Imagine for a minute that you read in the newspaper that your business
has been outlawed by the town police - reversing prior on-the-record
quotes that your business was perfectly legal. The proclamation
targets your company specifically; your competitors are still free to
do business. Further, the proclamation itself does not identify the
police official who has declared you an outlaw. No one called you, no
one talked to you, and you were never given
any chance to address whatever the issue is. Your business, while
legal yesterday, is apparently illegal today without
any judicial ruling or legislation. This is simply not a situation
compatible with the Rule of Law.
The Mint press release is carefully worded to connect separate
concepts as if they were related. It implies that making private money
is illegal because the United States Federal Government has an
"exclusive" power to coin money, citing Article I, section 8, clause 5
of the Constitution. But the word "exclusive" does not appear in the
Constitution as quoted. The Constitution is, by its very nature, a set
of enumerated powers and restrictions on governments, not on people.
The *states* are restricted from coining money. The
*people* are not, and in fact numismatists are aware that the United
States has a rich and well-documented history of private mints
producing private circulating currency which, while not "legal
tender", was "lawful money". Americans create new forms of private
money all the time, from casino tokens to debit cards to PayPal to
GoldMoney. The Treasury Department appears to have suddenly targeted
certain private money, and I suspect it expand its scope soon enough.
Potentially most disturbing of all, 18 USC 486 was actually passed to
keep people from passing counterfeit replica coinage that was not
backed by actual bullion. It is now being used to do the exact
opposite - to ban using money that has real value.
At one point I performed an extensive analysis of 18 USC 486's
legislative and legal history. The historical record showed it was
firmly intended for use as a counterfeiting law, not to ban private
currency. The courts have ruled on this specific issue and found that
18 USC 486 does not reach private currencies. The reasons are
straightforward: to counterfeit something is to make a passable copy
of it for purposes of deception. The standard for counterfeiting has
always been that an ordinary person in ordinary commerce
would likely confuse the item with a specific other item. If you color
photocopy a $20 bill, you are counterfeiting. If you substitute Mickey
Mouse for the President, color it orange, and call it a Disney Dollar,
you are not counterfeiting. Disney has not committed a crime by making
their own money, even though its overall look may be similar to that
of the FRN and it may use similar symbols. No
ordinary person would confuse a Disney Dollar with a Federal Reserve
Note. For the same reason, you cannot counterfeit a $3 bill. It is
well known that there is no such bill. You could make one, and you
might even convince someone that it was a FRN, and that would be
fraud, but the bill itself could not be counterfeit.
18 USC 486 was a Reconstruction-era law intended to police
counterfeiting. At the end of the Civil War, the United States
re-backed its currency with bullion. During the war, private
businesses had issued "store tokens" to deal with the dearth of
specie. Some were legitimate, but others looked very like cents and
were easily confused. But a collection of cents was redeemable in
bullion; a collection of tokens was not. Congress acted to insure
individuals could not issue private coinage that would deceive an
ordinary observer into thinking it was U.S. coin, but was not actually
redeemable in bullion. That law was later re-codified as 18 USC 486.
One hundred and twenty years later, the Treasury Department has acted
to stand 18 USC 486 on its head, using it to ban the use of coinage
that *is* bullion and does not closely resemble circulating coin, in
place of coinage that has no real value. Black has become white; white
has become black - or so Treasury would have us believe.
It is interesting that this attack on circulating silver comes
precisely at the time the gold and silver markets are being harshly
suppressed, shortly after Goldman Sachs' Paulson took Treasury's helm.
Coincidence? I think not. A new tone has been set for the next few
years, and I don't much like its sound.
Liberty Dollars Not Legal Tender, United States Mint Warns Consumers
Justice Determines Use of Liberty Dollar Medallions as Money is a Crime
Washington, D.C. — The United States Mint urges consumers considering
the purchase or use of "Liberty Dollar" medallions, marketed by the
National Organization for the Repeal of the Federal Reserve Act and
the Internal Revenue Code (NORFED), to be aware that they are not
genuine United States Mint bullion coins, and not legal tender. These
medallions are privately produced products that are neither backed by,
nor affiliated with, the United States Government. Prosecutors with
the Department of Justice have determined that the use of these gold
and silver NORFED "Liberty Dollar" medallions as circulating money is
a Federal crime.
NORFED is headquartered in Evansville, Indiana, and the medallions
reportedly are produced by a private mint in Coeur d’Alene, Idaho.
NORFED claims that more than $20 million dollars worth of Liberty
Dollar coins and notes are in circulation.
Consumers may find advertisements for these medallions confusing and
should take note of several issues related to them. The advertisements
refer to the product as "real money" and "currency." These medallions
might look like real money because they:
* Bear the inscriptions, "Liberty," "Dollars," "Trust in God"
(similar to "In God We Trust"), and "USA" (similar to "United States
of America"), and an inscription purporting to denote the year of
* Depict images that are similar to United States coins, such as
the torch on the reverses of the current dime coin, 1986 Statue of
Liberty Commemorative Silver Dollar and 1993 Bill of Rights
Commemorative Half-Dollar, and the Liberty Head designs on the
obverses of United States gold coins from the mid-1800s to the early
However, despite their misleading appearance, NORFED "Liberty Dollar"
medallions are not genuine United States Mint coins, and they are not
The advertisements confusingly refer to NORFED "Liberty Dollar"
medallions as "legal" and "constitutional." However, under the
Constitution (Article I, section 8, clause 5), Congress has the
exclusive power to coin money of the United States and to regulate its
value. The United States Mint is the only entity in the United States
with the lawful authority to mint and issue legal tender United States
Under 18 U.S.C. § 486, it is a Federal crime to pass, or attempt to
pass, any coins of gold or silver intended for use as current money
except as authorized by law. According to the NORFED website, "Liberty
merchants" are encouraged to accept NORFED "Liberty Dollar" medallions
and offer them as change in sales transactions of merchandise or
NORFED tells "Liberty associates" that they can earn money by
obtaining NORFED "Liberty Dollar" medallions at a discount and then
can "spend [them] into circulation."
NORFED’s "Liberty Dollar" medallions are specifically marketed to be
used as current money in order to limit reliance on, and to compete
with the circulating coinage of the United States. Consequently,
prosecutors with the United States Department of Justice have
concluded that the use of NORFED’s "Liberty Dollar" medallions
violates 18 U.S.C. § 486, and is a crime.
The United States Mint has a Consumer Alert with photos of Liberty
Dollars at http://www.usmint.gov/consumer/index.cfm?action=HotItems
Contact: Press inquiries: Becky Bailey (202) 354-7222 http://www.usatoday.com/money/2006-09-14-liberty-usat_x.htm
Feds lower boom on alternative money
Updated 9/15/2006 3:01 AM ET E-mail | Save | Print | Reprints &
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By Barbara Hagenbaugh, USA TODAY
WASHINGTON — The government Thursday warned consumers and businesses
that it is illegal to use alternative money known as "Liberty Dollar"
coins, which organizers promote as a competitor to the almighty dollar.
"We don't want consumers to be fooled," U.S. Mint spokeswoman Becky
Bailey says, noting U.S. Attorneys offices across the USA have noticed
a marked increase in inquiries about the coins.
The coins' producers vowed to fight the government's decision.
Evansville, Ind.-based National Organization for the Repeal of the
Federal Reserve Act and the Internal Revenue Code, otherwise known as
NORFED, has been making the Liberty Dollar coins for eight years and
claims $20 million is in circulation. The group says the money, unlike
official U.S. cash, has a hedge against inflation because it is made
almost entirely of silver and is backed by stocks of silver and gold
in a vault in Idaho.
The coins are then spent by the group's 2,500 Liberty Associates in
stores run by fellow supporters or are accepted unknowingly by clerks
who are unaware they are not receiving real money.
The Justice Department has determined that use of Liberty Dollars,
which come in varying denominations, "is a crime," according to the
Mint, which issued a rare public warning Thursday.
"The United States Mint is the only entity that can produce coins,"
The Mint notes the coins share some resemblances to real money, such
as the term "Trust in God" instead of "In God We Trust" and use of a
torch in the design. Such similarities may confuse people into
thinking the money is real, the Mint says.
But NORFED says it will challenge the government, arguing it has never
claimed Liberty Dollars were official money and that it has a right to
offer an alternative.
"The designs and verbiage ... are original and are not copies of any
U.S. Mint currency," NORFED Executive Director Michael Johnson said in
It's unclear how many people or businesses are unknowingly holding
Liberty Dollars, which cannot be exchanged for real money at banks.
In a case in Buffalo, a man and his son are set to go on trial next
month after they knowingly tried to buy beer at a Buffalo Sabres
hockey game with Liberty Dollars.
The Mint did not say if government officials will seek to prosecute
individuals or NORFED after its warning.
Reed Runk, part-owner of Kendall Funk & Bismark Jewelers in
Chambersburg, Pa., says the store has been accepting Liberty Dollars
for about a year and has sold a few as well. Runk says the store will
continue to accept and sell the coins.
"We just feel that they are something that educates people as to what
the monetary systems are like in the world, that they are a fiat
system, that if people lose faith in them, they will collapse," he
says. Besides, "They are a good-looking coin."