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How bad money keeps good money down - Open Knowledge — LiveJournal

Feb. 10th, 2008

03:41 am - How bad money keeps good money down

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I had read about the Liberty Dollar raids several months ago, but I didn’t know what to make of them, since it wasn’t obvious from the news reports whether they were shut down for creating a competing currency, or whether they were shut down for other, more legitimate reasons.

A comment on a discussion about the gold standard over at MarginalRevolution prompted me to investigate further, and read the original affidavit supplied in the application for the warrant to seize the coins.

From what I can tell, the raid does indeed appear to have been justified primarily on the grounds that NORFED was issuing coins and bills as currency, in competition with U.S. government issued currencies. If you’ve ever wondered why there’s no competition to fiat currency, this affidavit helps explains why.

Here’s my comment in full:

Bernard Yomtov, it’s _not_ obviously legal “…to barter medallions with Ron Paul’s face or any other design on them for some other goods or services…”.

According to the affidavit supplied in the application for the seizure warrant:

“I [FBI special agent Andrew F. Ramgnuolo] am presently investigating violations of Federal Laws, specifically violations of Title 18 United States Code, Section 486, Uttering coins of gold, silver or other metal, Title 18 United States Code, Section 489, making or possessing likeness of coins, Title 18 United United States Code, Section 1341, Mail Fraud, Title 18 United 18 United States Code, Sections 1343, Wire Fraud, Title 18 United States Code, Sections 1956 and 1957, Money Laundering, and Title 18 United States Code, Section 371, Conspiracy.”

From my reading of the affidavit, it appears that the Feds believe that Von NotHaus and associates committed the following crimes:

a. created coins and marketed them as a competing currency to the U.S. Dollar
b. created coins that looked too much like U.S. Mint issued currency
c. defrauded buyers of the coins by implying that the coins were worth their face value in U.S. dollars, when in fact the silver content of the coins was worth much less

The wire fraud, and mail fraud charges appear to result from the NORFED’s use of the mail and the internet to sell the coins. The money laundering charge results from the wire and mail fraud charges, since it’s illegal to “conduct..financial transactions which…involve the proceeds of specified unlawful activity.” I suspect these charges were necessary to justify seizing the coins under asset forfeiture laws.

The conspiracy charge appears to result from von NotHaus and associates continuing to sell the coins even after the U.S. Mint warned them that the Mint considered their practices to be illegal.

In my opinion, with respect to the first charge, the laws making it illegal to create a competing currency are clear violations of individual liberty. Whether or not the U.S. government itself issues currencies backed by gold, we should be able to create coins in competition with U.S. currency.

With respect to the second charge, I don’t think people should be able to pass off coins as if they were official, U.S. Mint issued coins. However, I don’t think von Not Haus did this. After all, the Feds are claiming that von Not Haus marketed the coins as an alternative to U.S. currency. If so, then it seems unlikely that buyers would believe them to be issued by the U.S. government.

The third charge is the only possibly legitimate one, in my opinion. The coin’s face value is much less than the spot price of silver at the time that the coin is issued, and the coins are periodically revalued as the price of silver changes. It’s possible that NORFED did not explain this adequately to many of the buyers.

Here’s some relevant excerpts from the affidavit:

Agent Ramgnuolo argues:

“…NORFED’s purpose in the minting, distribution, sale, and circulation of the American Liberty Dollar coins is to make money through the use of this alternative currency by merchants, Regional Currency Officers [an RCO is basically someone who buys NORFED dollars and coins at a discount, then sells them for a profit], Liberty Dollar Associates , and the public. The use of silver, gold and copper coins in this manner is a violation of Title 18 United States Code (U.S.C) Section 486 which states:

Uttering coins of gold, silver or other metal

Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countires, or of original design, shall be fined under this title or imprisoned not more than five years, or both.”

He also cites section 489:

Title 18 United States Code (U.S.C.) Section 489 states:

Making or possessing likeness of coins

“Whoever, within the United States, makes or brings therin from any foreign country, or possesses with intent to sell, give away, or in any other manner uses the same, except under authority of the Secretary of the Treasury or other proper officer of the United States, any token, disk, or device in the likeness or similtude as to design, color, or the inscription thereon of any of the coins of the United States or of any foreign country issued as money, either under the authority of the United States or under the authority of any foreign government shall be fined under this title.”

The affidavit quotes in full a letter the U.S. Mint sent to each NORFED RCO, outlining the reason why they thought that NORFED’s coins were illegal:

“First, 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 production; and

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, [more coin descriptions]

However, despite their misleading appearance, NORFED “Liberty Dollar” medallions are not genuine United States Mint coins and they are not legal tender.

Second, 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. By Statute ( 31 U.S.C. 5112(a) ), Congress specifies the coins that the Secretary of the Treasury is authorized to mint and issue and requires the Secretary to carry out these duties at the United States Mint (31 U.S.C 5131). Acccordingly, the United States Mint is the only entity in the United States with the lawful authority to mint and issue legal tender United States coins.

Under 18 U.S.C 486, it is a Federal crime to utter or pass, or attempt to utter or pass, any coins of gold 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 services. Further, NORFED tell “Liberty associates” that they can earn money by obtaining NORFED “Liberty Dollar” medallions at a discount and then can “spend [them] into circulation.” Therefore, NORFED’s “Liberty Dollar” medallions are specifically intended 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 use of NORFED’s “Liberty Dollar” medallions violates 18 U.S.C. 486.”

Original: craschworks - comments

Comments:

From:hiro_antagonist
Date:February 10th, 2008 02:05 pm (UTC)
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While individual liberty is good, I am not sure if it is a supreme good. Operating in a society, we trade some individual freedoms for a better functioning society. A single currency is one of these. I think the EU's implementation of the euro can be seen as clear evidence as to the value of this.

Are competing currencies nice? Yes. Are they more trouble than they're worth in the long run? Yes.

Frankly, a world-wide universal currency would make the valuations of services and goods a lot easier in some respects.
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From:crasch
Date:February 10th, 2008 02:17 pm (UTC)
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Are competing currencies nice? Yes. Are they more trouble than they're worth in the long run? Yes.


And you know this...how?


Frankly, a world-wide universal currency would make the valuations of services and goods a lot easier in some respects.


Without legal tender laws, and other currency and banking restrictions, I think we would see the consolidation of the world's currencies around 1 or 2 competing standards.
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From:hiro_antagonist
Date:February 10th, 2008 02:31 pm (UTC)
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From history. As humanity has gone through the ages, we've moved in one direction, and that's towards less currencies rather than more. Simply because it makes life easier. In the end, I think that perhaps that's the best argument there is.
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From:crasch
Date:February 10th, 2008 02:36 pm (UTC)
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That humans have tended toward fewer currencies is no argument that it is a good thing. It could be, like crop monoculture, a behavior that has short term benefits, but long term hazards.

And it's certainly no argument that forcing a currency monoculture by government fiat is a good thing.
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From:hiro_antagonist
Date:February 10th, 2008 02:45 pm (UTC)
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It's an argument from a utilitarian point of view, yes. Does ease of use outweigh any advantages multiple currencies offer? Ease of use wins for human beings 99.99% of the time, and I think with good reason.

Everything is done at the barrel of a gun, when you get down to it. It's who's at the end of that gun that we have more control of these days than before.

From a cultural perspective (rather than an individual perspective), it's better for everyone to be on one standard instead of competing standards, even if the the standard isn't the best in the world.

I know this sounds like The Borg (TM) talk, but when it comes to matters that deal with society, one has to take the view of the whole rather than the view of the individual.
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From:gentlemaitresse
Date:February 11th, 2008 02:10 pm (UTC)

Single currency

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If we cannot have competing currencies, then we will have to outlaw the use and distribution of foreign coins in this country. The Canadian coins, in particular, can be mistaken for US coins.

How about if you make your choices for your better functioning society, and allow others to make their own? No, you can't do that because the only way you can make this "better functioning society" of yours is if you force everyone else to do things the way you think is best.

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From:hiro_antagonist
Date:February 11th, 2008 02:16 pm (UTC)

Re: Single currency

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That's what it's come down to for the last two hundred years or so, you know?

Look at all the fuss that was made when having a national reserve and federal banks were proposed. We're better off now for it, though I suppose by your leanings you would have virulently opposed such a thing at the time.
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From:(Anonymous)
Date:February 13th, 2008 04:43 pm (UTC)

Re: Single currency

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What about virulently opposing such thing at THIS time? You say that "We're better off"... Really? We're better off with a currency that loses its value over time? We're better off with a currency in control by a handful of men, instead of millions of men?

Yes, you have made it very clear that you would gladly trade a little of your freedom for a little security. You deserve neither and will lose both.
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