The Liberty Dollar is the brain child of Bernard von Nothaus, a libertarian and gold bug entrepreneur who decided we needed a free market in competing currencies The original name of the Liberty Dollar organization was NORFED (National Organization for the Repeal of the Federal Reserve and the Internal Revenue Service) which was later changed to simply Liberty Dollars.
No relation to the old silver dollar coins minted by the U.S. that showed an image of Lady Liberty.[wp]
 The Scam
The Liberty Dollar is backed by silver and is issued in silver one-ounce rounds, paper currency, and an electronic "e-Liberty Dollar" version. There is a slight problem with it: one ounce of silver is assigned a $20 face value. Silver is currently trading at about $36 an ounce. One of the ideas behind the Liberty Dollar is to promote a return to silver-backed currency. Yet if one trades in their Liberty Dollars for silver rounds, they will receive the current spot price worth of silver for every $20. The Liberty Dollar was originally pegged at $10/ounce when it was introduced during the late 1990s when silver was trading for under $5. When the price of silver went over $10, von Nothaus simply cut the amount of silver backing each dollar by half (and offered to trade older $10/ounce Liberty Dollar paper currency and silver rounds for an equivalent face value of the $20/ounce stuff.) Forbes magazine summed it up nicely in an article panning the Liberty Dollar concept: "How to lose half your dough? Trade it for silver." Some libertarians were rightfully also dubious about the concept, noting that Liberty Dollar's distribution was set up in the same manner as a multi-level marketing company and if you want to trade in silver, use the current spot price and not an arbitrarily designated value.
There is another slight problem with it: few legitimate businesses accept it. Indeed, most of the sale of Liberty Dollars has been to coin collectors, and the largest secondary market for Liberty Dollars is people selling the Liberty Dollars they were earlier suckered into buying to collectors on eBay. Perhaps realizing this, von Nothaus began introducing many variations and commemorative Liberty Dollar silver rounds: one of them honoring Ron Paul, another opposing the Iraq War, and another honoring chiropractors.
The United States Mint issued a consumer warning about the "Liberty Dollars", stating they were "not genuine United States Mint bullion coins and they are not legal tender", adding, "...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."
 That's just a little bit mo' than the law will allow
A bigger problem: U.S. federal law allows for local alternative currencies to circulate (the Ithaca, New York "Ithaca Hour" is one such currency), but prohibits alternative currencies intended to circulate nationally if they are misrepresented as legal tender. Bartering using silver rounds is legal (some of the more radical anarcho-capitalist fringe do this) but the Liberty Dollar silver rounds were designed in such a way as to mimic real U.S.-minted coins, right down to an image of Liberty on the face of the coin and a dollar value of $10 or $20 on it. This caused several cases of confusion when store clerks accepted a Liberty Dollar $20 silver round thinking it was legal tender, then finding it wasn't and finding it was only worth half that in silver. For this reason, the Federal Bureau of Investigation after repeated warnings that the Liberty Dollar as currently minted was illegal, raided the Liberty Dollar headquarters in November 2007. Much of their mintage stored at their Evansville, Indiana headquarters was confiscated along with computers and files. Von Nothaus was later found guilty of counterfeiting. Liberty Dollars has a pending lawsuit seeking the return of the confiscated items, which has also not yet gone to trial.
 See also
- ↑ http://www.kitco.com/charts/livesilver.html
- ↑ http://www.forbes.com/forbes/2000/0403/6508062b.html
- ↑ United States Mint: "NORFED’s 'Liberty Dollars'"
- ↑ Current Federal regulations allow local currencies to operate as long as they are redeemable at face value with US Dollars, are reported as taxable income, are not designed to be confused with or mistaken for US currency, and are not issued in denominations smaller than $1.
- ↑ http://www.fbi.gov/charlotte/press-releases/2011/defendant-convicted-of-minting-his-own-currency
- ↑ http://www.freemarijuanachurch.org/content/mystory.html