The Liberty dollar is an alternative form of currency issued in the United States by NORFED, a non-profit organization based in Evansville, Indiana. The paper currency is backed by precious metal (silver and gold bullion) and is redeemable when presented at a NORFED Regional Currency Office. The coin currency is minted from pure silver or gold.
NORFED stands for National Organization for the Repeal of the Federal Reserve Act, whose stated goal is to encourage use of the Liberty currency and to highlight the fallacies of the U.S. Federal Reserve "fiat currency."
Just as many states, banks, and local communities once issued their own currency in the past, the Liberty dollar is a legal form of currency and is not considered counterfeit by the U.S. Government. According to NORFED, the currency was submitted to the U.S. Treasury Bureau of Engraving & Printing for review, which verified the legal legitimacy of the currency.
The Liberty currency is designed to be interchangeable on a $1 to $1 basis with Federal Reserve notes. The flexibility of the Liberty Dollar to remain backed by precious metals, yet be interchangeable on a $1 to $1 basis with Federal Reserve notes achieved as follows. Silver coins minted with a face value of $10 are to be re-minted at $20 when the value of the Federal Reserve notes devalue sufficiently due to inflation. The currency is produced in coinage, paper currency, and electronic forms.
Liberty silver and gold coins are minted from .999 pure silver, or .9999 pure gold. Modern security features are built-in to Liberty paper currency, including holograms, microprinting, hot gold or silver foil stamping and an invisible synthetic DNA security thread. Anyone familiar with the appearance of the certificates can easily spot a counterfeit.
Liberty currency exists in $1, $5, and $10 bills backed by a one-ounce silver coin with a face value of $10. There is also a $500 bill backed by a one-ounce gold coin with a face value of $500. One feature that Liberty currency shares with the euro but not with the U.S. dollar is that the bills' size and color varies with the value. However, unlike the euro, it's only the long dimension which varies. The higher the value, the longer the bill.
One might note that the face value of the coins is larger than the spot silver or gold price. The extra cost is here used to buy more silver and gold to back more notes and make more coins, as well as for storage, shipping, insurance, and other costs. While normally this would be an extra numismatic value, this mismatch presents a potential vulnerability of the currency, since numismatic value decreases with the increase of the amount of currency in circulation.
Liberty Dollars in the Marketplace
NORFED maintains a list of merchants who specifically accept the Liberty dollar, however, the organization encourages the tendering of Liberty currency for all purchases. Surprisingly, a high number of merchants will accept Liberty coinage without realizing the money is not produced by the Federal Reserve. Undoubtedly, these merchants may experience problems with their bank rejecting the coinage for deposit. As a solution to this, some businesses tender the currency back out to customers, or exchange the Liberty dollars for Federal Reserve currency through NORFED. Others, however, train cashiers to not accept Liberty currency. Due to the Liberty dollar's limited circulation, the full retail reaction to the currency remains to be seen.
According to estimates by the currency's founder Bernard von NotHaus, currently, over 100,000 people are using $10 million in Liberty Dollars.