Legal Tender and Illegal Toughness
Government heavies enforce money monopoly
November 1, 2007
Fred Foldvary, Ph.D.
Economist

On November 14, 2007, the agents of the Federal Bureau of Investigation and Secret Service raided the premises of Liberty Dollar office in Evansville, Indiana. Liberty Dollar stated that the agents confiscated the gold, silver, and platinum that was stored in the premises, and two tons of Ron Paul Dollars that had just been delivered.. "They also took all the files, all the computers and froze our bank accounts."

The British philosopher John Locke wrote in his 1690 classic Two Treatises of Government that the main purpose of government is to protect our lives and property. This purpose was inscribed in the US Constitution in the Fourth Amendment: "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated." Even if the government agents had a warrant, the Liberty Dollar organization had not committed any harm.

Liberty Dollar issued small disks (medallions) made of gold, silver, and other metals, for use in exchanges. They are denominated in U.S. dollars as the unit of account, but do not pretend to be official U.S. dollars. The firm also issued paper currency backed by gold and silver. About twenty million dollars of the currency has been issued. The paper currency stored at the office was also taken.

Now the Liberty Dollar firm not only has no more products, it also has no customer records. The customers along with the firm have been stripped of property. Those holding liberty dollar paper currency are no longer able to redeem it for precious metals.

A class action suit is now being organized by Liberty Dollar and its customers. Federal Reserve and other government officials had previously stated that the use of Liberty Dollars, when the user did not claim to be paying with legal tender U.S. money, was not illegal. Barter is legal, and to offer a silver disk in exchange for goods constitutes barter. Moreover, the Liberty Dollar paper currency does not at all resemble Federal Reserve Notes.

This raid follows previous action taken by the federal government against Liberty Dollar. On September 13, 2006, the US Mint declared that it is illegal to use the Liberty Dollar. On March 20, 2007l Liberty Services, the organization that distributes the Liberty Dollar, filed suit against the U.S. Mint in U.S. District Court in Evansville Indiana to stop the government from claiming that the use of Liberty Dollar is a federal crime.

With Ron Paul, by philosophy a libertarian, running for president as a candidate of the Republican Party, Liberty Dollars had issued copper, silver, and gold medallions showing Ron Paul, inscribed "Ron Paul for President 2008." Ron Paul has advocated returning to commodity money, based on gold as it was prior to the forced taking of the public's gold by the federal government during the Great Depression. The Ron Paul medallions were not sponsored or initiated by the Ron Paul campaign.

It could be that the federal government was more scared of the Ron Paul dollars than of the other private currency. Thousands of people offering to trade Ron Paul dollars for goods would have brought the candidate great publicity. We may well see the federal government blocking other Ron Paul promotions, since a candidate who advocates strict compliance with the U.S. Constitution may well present the greatest threat to overreaching federal power in the history of the United States.

Perhaps just as bad from the federal administration's point of view was the "Peace Dollar" that Liberty Dollar issued, inscribed "PEACE" on one side and "STOP THE WAR" on the other.

The Seizure Warrant issued by a United States District Court states that the Liberty Dollars are forfeitable because they are involved in money laundering or mail fraud. The government also claims that some Liberty Dollars are similar in design to U.S. coins. Liberty Dollars also issued Hawaiian Dalas, which presumably could be used for illegal purposes.

If currency used for money laundry or mail fraud is not allowed, then it seems to me that official U.S. dollars should not be allowed to circulate either, as these are much more used for those purposes than Liberty Dollars. But then, I'm not an attorney, so perhaps there are legal reasons why plain logic does not apply to federal law.

U.S. currency is fiat money, not backed by any commodity. The U.S. dollar has been losing value steadily since the end of World War II, and during 2007 it depreciated rapidly against other currencies, so gold and silver prices in U.S. dollars have soared. The fact that the federal government seems to be so scared of a few million dollars worth of private metal disks used in transactions perhaps shows that the U.S..dollar is not as mighty as most folks have been led to believe. That, plus the depiction of Ron Paul and Peace on private currency, utterly unlike any official coins, may well have led the U.S. chiefs to panic.

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Fred Foldvary, Ph.D.
Economist

FRED E. FOLDVARY, Ph.D., is an economist and has been writing weekly editorials for Progress.org since 1997. Foldvary's commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and currently teaches at San Jose State University.

Foldvary is the author of The Soul of LibertyPublic Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary's areas of research include public finance, governance, ethical philosophy, and land economics.

Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.