A few years ago I wrote an article for The Freeman on a private silver-based currency, the Liberty Dollar, at that time known as American Liberty Currency. The issuing organization, NORFED continues to produce both coin-like silver pieces and silver-redeemable paper certificates. I saluted it as a noble experiment, though I doubted it would catch on in any big way while fiat dollar inflation remains in single digits. I called the alternative currency “fully legal”. Now come news reports saying that the US Mint is disputing its legality. (HT: “Common Sense” at HNN.) USA Today reports:

The government Thursday warned consumers and businesses that it is illegal to use alternative money known as "Liberty Dollar" coins, which organizers promote as a competitor to the almighty dollar.

Here’s what the US Mint’s own website says:

prosecutors with the Department of Justice have determined that the use of these gold and silver NORFED "Liberty Dollar" medallions as circulating money is a Federal crime.

Unfortunately the prosecutors are not identified, and no actual statement of the determination is quoted or hyperlinked. But the US Mint site tries to provide a basis for considering the Liberty Dollar illegal. First we have this statement:

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.

This statement, however, is false (unless “money of the United States” means “money of the United States government,” in which case it is perfectly beside the point). The US Constitution does authorize the Congress to coin money, and it prohibits the states from coining money, but it nowhere prohibits private individuals from coining money, nor citizens from using privately minted coins (of which there have been numerous examples over the years) or foreign coins (which were quite popular in the early years of the Republic). It nowhere says that the Congressional power to coin is exclusive. Here are the relevant passages, all the passages in the US Constitution that mention coins:

The Congress shall have Power … To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; …

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;

The US Mint site continues:

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). Accordingly, 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.

True, but again beside the point. Being “legal tender” and being legal are two different things. The issuers of Liberty Dollars, and the faces of the pieces themselves, don’t claim them to be “legal tender United States coins” in the sense of “this note is legal tender for all debts”, meaning, no creditor can refuse it in discharge of a contractual debt. Anyone is free to refuse payment in Liberty Dollars.

Then comes the Mint's genuinely troubling assertion:

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 or silver intended for use as current money except as authorized by law.

Here’s the text of the hyperlinked statute:

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 countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.

The Liberty Dollar folks may have a hard time making the case that this doesn’t apply to them. True, they don’t call their silver pieces “coins”, but they do call them “currency” and “money”, and they do market them for use as current (circulating) money. Repeal 18USC486!

UPDATE: Here is a reply to the US Mint by someone from NORFED.