“liberty dollars are stupid”

(Hey, I’m just quoting the person who did the search.)

Liberty Dollars: Not a scam, just really lame

So the whole situation with the liberty dollar has been clarified for me, and I now understand that it’s not a scam, just really lame.

Here is the story:

The liberty dollar people, before november 2005 issued 10 liberty dollar certificates, it would say on it “This warehouse receipt for One (1) Troy Ounce of .999 Fine Silver” Thus you could turn in your silver cert for an ounce of silver. Or, you could get from then a $10 silver “round” (they don’t use the term coin for legal reasons) which contained in it one ounce of silver.

After november 2005, the liberty dollar people started issuing $20 silver certificates. These silver certificates also entitled the bearer to one ounce of silver. They also issued $20 “rounds” containing one ounce of silver.

Now, if you are a normal, rational person, you would think that two 10 liberty dollar silver certificates would be equivalent to one 20 liberty dollar silver certificate. You know, 10 + 10 = 20. Not that hard, right? That’s what I figured, which is why I thought that in November 2005 they had just devalued their currency by 50%. Well, you’d be wrong.

Your old 10 liberty dollar certificates could still be redeemed for an ounce of silver, and the 10 liberty dollar rounds (of course– conservation of mass applies in monetary economics just as much as it applies in physics) still had an ounce of silver in them.

Since the liberty dollar people continue to honor the 10 liberty dollar silver certificate, you can give them your 10 liberty dollar certificate, turn it in, and get an ounce of silver. Just like with the 20 dollar silver certificate. Or if you want to think in terms of physical metal, note that the 10 liberty dollar round has the same amount of silver in it as the 20 liberty dollar round.

So if I have two 10 liberty dollar rounds, how much money do I have? 20 liberty dollars? Well, no, because the 20 liberty dollar round has half as much silver in it as two 10 liberty dollar rounds. Do I then have forty liberty dollars? Well, I suppose, because I can exchange them for two twenty liberty dollar rounds. So is 10 + 10 = 40?

Suppose I went to the store and I had a 20 liberty dollar. I wanted to buy something, which would cost me 20 liberty dollars if I wanted to buy two. But I only want one. The seller only wants to sell me one. (In a normal world, we’d say that one item cost 10 dollars. But we can’t, because liberty dollars are so screwed up.) What do we do? Well I could give him my 20, and he could give me back a 10. But the ten is worth the same as a 20. So, maybe he should give me a 5? But if the 10 isn’t worth half as much as a 20, how do I know that the 5 is worth half as much as a 10? What if the five is worth 1/4 as much as a 10? (5 is 1/4 of 20, so it makes sense that a 5 should be worth 1/4 of a 20. But then if a 10 is worth the same as a 20, then the 5 is worth 1/4 of the ten!)

The solution to this conundrum, of course, is to just say well let’s realize that since two of the item I want costs 20 liberty dollars (or 10!), which is equivalent to one ounce of silver, buying one item will cost me half an ounce of silver. I give the merchant my 20 (or 10!) and he takes his hacksaw, cuts it in half, keeps half, and gives me the other half. Problem solved.

Why, oh why, did they set up such a crazy system?

So basically the number stamped on a liberty dollar round or certificate is just decorative? It has no bearing to the real world?

Well, no, not exactly. They set this crazy system up because they thought that there should be a “fake peg” between the liberty dollar and the us dollar. Before November 2005, the us dollar price of silver was under $7.50/ounce. So they figured, well, we’ll stamp “10″ on each of these one ounce rounds, so people can think they are worth ten us dollars. That will make life easier. People can buy stuff and not have to do exchange rate conversions in their head.
After November 2005, the us dollar price of silver went above $7.50, so they said, well, let’s stamp “20″ on our one ounce rounds from now on. That way we can try to convince people that they are each worth about 20 us dollars.

Apparently, the rocket scientist who came up with this thought that people were too stupid to understand what an exchange rate is, so we’ll stamp some arbitrary number on our rounds to let people think that the liberty dollar is pegged to the us dollar. Of course it would be really stupid for someone to trade 20 us dollars for a 20 liberty dollar round, because the usd price of one ounce of silver is about 13 usd.

In writing this up, I have realized that there is a scam here, just one that’s completely different than the one I thought existed in the first place. Yesterday I thought the scam was that the liberty dollar actually represents real silver. Today, I have realized that the liberty dollar does actually represent real silver, but the scam is that the liberty dollar is pegged to the us dollar.

It’s sort of a “bad scam,” though. Because if you’re concerned about usd inflation, then you don’t want the currency you use to be pegged to the usd. But the liberty dollar people are trying to make people think that it is.

Weird stuff.

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11 Comments on ““liberty dollars are stupid”

  1. Your correct that the Liberty dollar has an exchange rate that they decide upon in a semi arbitrary manner. They did clearly state that as far as investment purposes are concerned that
    isn’t it’s real purpose. This competing currency is set up not to favor the dollar. I have never bought anything in a Liberty Store, but from the theory I would guess that this tends to drive even more currency into the system. the Idea is to replace an even lamer currency with one that is still a bit lame but not nearly as lame as the pieces of paper most people are using for exchange right now. I mean lets face it the paper in a twenty dollar bill is worth about the same amount as a one dollar bill. we went off the gold Standard years ago. So our currency is actually based on what others see as the current score on the overall worth of the US economy. Tthat does leave quite a bit of room for fluctuation doesn’t it. Especially since machines can produce a large amount of things as long as oil is beig pumped from the ground to transport the things that are being made.

  2. One more thing, the largest part of our system is based on debt. There is always interest on Debt. So the economy must always expand if it is going to keep pace with it’s debt and become more valuable. Exponetial expantoin absolutly will not continue forever. Sooner or tter a critical shortage will occur
    and either a significant retreat will occur or there will be total collapse. Guess how close we are to the total collapse.?

  3. hehe. You say: “the paper in a twenty dollar bill is worth about the same amount as a one dollar bill”

    but the gold in a 20 dollar liberty dollar is worth the same as the gold in a 10 dollar liberty dollar!

    • Yes. the amount of silver in the 20 dollar liberty is the same as the 10 dollar liberty. Thats because the silver base changed due to the rise in the price of silver , so there is a period where both will circulate together. The face values are there as a suggested price. Unlike federal reserve notes the Liberty Dollar actually has a chance to go up in value. You won’t ever see a 10 “dollar” federal reserve note go up to 20.

  4. The idea was to try to push the serfs toward the idea of trying to spend (circulate) liberty dollars. However, I agree with you: bad money drives out good (which is then saved, and used as an investment).

    It would have been better to simply put “one ounce silver, .999 fine” and leave off the dollar amounts. However, if that were the case, it would be harder to get the cash register folks to pocket the dollars, and put their own FRNs in the cash register when you wanted to make a purchase. (The psychology of the public must be taken into account when designing an alternate currency.)

    Bernard Von Nothaus (couldn’t have chosen a better name! Preferably something that sounds a little more like “Nuthouse” for when you’re describing the foreign concept of sound money to the uninitiated) was actually smart enough to understand that the general public is venal and uninformed, and that you had to focus their attention on the dollar symbol on the coin, in order for their minds to not return to the minimal knowledge of bimetallism they learned in high school (or in college, if they attended Libertyville, HS).

    Hopefully, you have a lot of one ounce silver and gold coins, no matter their markings. I personally prefer the Free Lakota Bank style, myself, or the ones from the Wyoming Free State Project.
    http://www.freestatewyoming.org

    I would continue pontificating on the manner, but I need to get back to editing video, for my homeboy, Joe Kennedy. (I was pleased to see that Harvey Silverglate, author of “The Shadow University” contributed to his campaign. TSU is the masterpiece book on the erosion of free speech in the US due to the legal precedent influence of government-financed college campuses gradually becoming the testing ground for further and further speech restrictions.)

    Peace,

    Jake

  5. Pingback: 2010 in review « Creative Destruction

  6. Why would Bernard von Nothaus tell people that they can bring their Liberty Dollars to any bank to exchange to US$? That was foolish of him to say that and thus he was partly a scammer or a liar. The whole thing was just PLAIN STUPID and stupidly executed and quite ugly as well, so it just proves how DUMB Americans are.

  7. The true fact of all this is that the American people since 1913 are still stupid and uneducated about their own currency and still use a debt system that enslaves them, steals their money, and ruins their future.

    It is well enough that the America Idiots do not understand the banking and financial system in their country, for if they did there would be a revolution before morning!

    Only a fool would ever save, or invest in ventures of paper denominated money.

    Only Silver and Gold are “real” money, everything else is the ghost of money.

    When the music stops, will you be holding paper or “real” money, that’s the real question to ponder.

  8. LOL – lame! Seeing as it is now 3 years later and the same Liberty Dollar bought in 2005 for 10.00 can now be sold for 50.00 on ebay – what was so lame?

    Yes, at the time they were expensive – but the concept was good b/c while the dollar bill buys less than it did in 2005, the silver that could be bought back then for 10.00 still has the same purchasing power (actually more!) it did – In other words – it did not lose any value. Paper did!

    Lame indeed! The users/owners of these things came out way ahead in the long run!

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