When Fort Knox couldn’t hold enough gold to back all the paper money in circulation, the U.S. government in about 1913 began weaning the greenback from being a promissory note for precious metals. Instead, the mighty dollar became “fiat currency.” In other words, it became a slippery theoretical thing that depended on the Federal Reserve to wave a big wand and decree its value. The markets adjusted accordingly. No longer could you trade in your buck for its equivalent in gold. Presumably, that’s when they really locked down Fort Knox.
Critics carped that this decision was folly, and they blamed it for every subsequent recession, depression, and hyper-inflated bubble burst in the economy. Even author L. Frank Baum felt so bad about abandoning the gold standard that he penned a children’s book in which the characters “follow the yellow brick road” to the Technicolor land over the rainbow—a green city where money is measured by the ounce, abbreviated as “Oz.”
The slow transition to fake money was complete in 1968, when “silver certificates”—the last of the promissory notes—were removed from circulation. It didn’t take long for libertarians to respond acrimoniously (it never does). They dubbed the new bills worthless “frog skins.” But the government ignored them (it always does). Eisenhower silver dollars were soon drained of any precious metal and went out of circulation. A few years ago, the U.S. Treasury issued the quarter-sized Sacagawea dollar to replace the quarter-sized “Susan B. Agony.” The libertarians were ready. They scoffed at the brass coin as more government-issue “fool’s gold.”
Rather than sitting back and letting the system collapse and taking all our savings with it, some libertarians founded the National Organization for the Repeal of the Federal Reserve Act in 1974. A mint master from Hawaii named Bernard Von NotHaus took the matter into his own hands and began issuing “liberty dollars” in 1998, backed by real silver and gold rather than the “national debt, Alan Greenspan, the IRS and taxes, and tanks and guns.”
“The most popular is the ten-dollar coin that is one troy ounce of silver,” according to James Hess, a local liberty-dollar advocate who lives in South Minneapolis. “There’s nothing like having the real thing. For someone who has never held an ounce of silver in their hand, it’s exciting and liberating. I buy gas with it, I buy lunch with it. I sometimes even buy groceries with it.
“Just as UPS and Fed Ex brought competition to the post office, the liberty dollar is forcing the Federal Reserve to improve its standards,” according to Hess. By way of a didactic warning, he added, “The Federal Reserve note doesn’t really belong to you. That’s why it’s illegal to deface a dollar. You’re just borrowing it. Even if it’s in your bank account, it’s not technically yours. All Federal Reserve money is just loaned out.”
But are liberty dollars legal? When I asked a woman at the U.S. Treasury, she deemed it permissible, and not counterfeit. “They’re doing what?” she said with a chuckle. “As long as it doesn’t say ‘legal tender’ on it, they can do what they want.” A man named Mike White at the Bureau of Engraving and Printing concurred. “Liberty dollars are not considered legal tender, but it’s fine if they do it,” he said. Many Twin Cities stores aren’t quite so sure. Liberty dollars are available at the Libertarian Party headquarters near Raymond and University avenues in St. Paul, so the Hampden Park Coop just down the street sometimes gets this alternate currency. In general, the coop doesn’t accept liberty dollars—unless a volunteer is willing to swap their own ten-dollar note with its rough equivalent in silver. Libertarian optimism is unfazed. “If you look back, not everyone accepted Visa or MasterCard, but now everyone recognizes credit cards. Same thing with checks. It was a trust issue,” explained Hess. He said there are now more than five million dollars of liberty currency in circulation.
Hess claims that a troy ounce of silver, or a ten-dollar liberty coin, is far more secure than a personal check or a Visa number. He claims liberty dollars can only gain in value. “If you look in the newspaper today, the price of silver is a little more than six dollars an ounce. The difference on the ten-dollar coin is the cost to mint the coin and pay for the shipping. Once the rate of silver is more than ten dollars an ounce, the tens will be melted down and made into twenty-dollar coins. You can trade in your ten-dollar coin and double your money!”
Banks do not share this enthusiasm about the new currency. At first, a local Wells Fargo branch accepted deposits of liberty dollars from a loyal customer, “but then they had to make a decision at the national level not to accept it,” said Hess. “I told them that I’d gladly take all their liberty dollars off their hands and give them regular Federal Reserve notes, but they wouldn’t do it.”
Nevertheless, Hess claims this is an asset that “banks don’t usually accept liberty dollars, because then the money doesn’t go to New York or out of town. It tends to stay in the community. It’s probably the main reason that I use the liberty dollar, because it helps the community I live in.”
Hess confessed that only a handful of shops, or “liberty merchants,” accept the coins in Minnesota, but “in Austin, Texas, liberty dollars are generally accepted in most stores. There are also five-hundred-dollar gold pieces made of an ounce of gold. Not many places will accept them, but I heard that there are some car lots in Texas that love them. So if you want to buy a car with gold, go to Texas.”—Eric Dregni
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