How bad money keeps good money down - Open Knowledge — LiveJournal
Feb. 10th, 2008
03:41 am - How bad money keeps good money down
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.”