I just spoke with reporter Alec MacGillis of the Washington Post, who was seeking background on the Liberty Dollar, the silver-backed private currency whose offices were raided by the FBI last week. (Previous blog entries on the case here and here. I first wrote about the Liberty Dollar project, whose parent organization used to be known as NORFED, National Organization for Repeal of the Federal Reserve Act, in The Freeman in July 2000.)

UPDATE: MacGillis quotes me in his new piece on internet reaction to the raid.

Evidently interest in the story continues to grow. Earlier today Google News counted 126 news articles on the raid. Many stories tie it to the Ron Paul campaign, because the Liberty Dollar organization recently began offering silver $20 and copper $1 pieces featuring Ron Paul’s face. The Washington Post ran reports by MacGillis on Saturday under the headlines “In Ron Paul Coins, Federal Agents Don't Trust” and “In Paul They Trust (The Feds May Differ)”.

A bombshell in the MacGillis articles is that the FBI’s affidavit, filed with a judge to get its search warrants, is now available online. The document (pdf) is available here.

MacGillis notes:

In the affidavit, an FBI special agent states that he is investigating Norfed for federal violations including "uttering coins of gold, silver, or other metal," "making or possessing likeness of coins," mail fraud, wire fraud, money laundering and conspiracy. "The goal of Norfed is to undermine the United States government's financial systems by the issuance of a non-governmental competing currency for the purpose of repealing the Federal Reserve and Internal Revenue Code," he states.

I’m not a legal expert, but since when is promoting the repeal of specific federal statutes a crime?

The affidavit also reveals that the FBI

• conducted an investigation of the legality of NORFED’s operations during which three undercover agents and one cooperating witness signed up as Liberty Dollar Associates (distributors). (p. 6)

• had its lab test the one-ounce silver Liberty piece, and found that it did indeed contain one ounce of .999 silver. (p. 9)

• found that NORFED “uses bank accounts to facilitate the distribution, sale, and circulation of the American Liberty Dollar currency” (p. 11) [?how is that relevant?]

• bases its investigation on the theory that the Liberty Dollar silver and copper pieces violate USC Section 486 (pp. 28 ff.), which is the same statute cited by the US Mint in its website allegations that the Liberty Dollar is illegal. As I have noted before, the statute does appear to outlaw the issuing of any metallic coins intended to circulate as currency. The legal question thus becomes whether round metallic pieces that are not called “coins,” and do not purport to be legal tender or government-issued, count as coins under the statute.

The affidavit contains the following bizarre paragraph (p. 33):

NORFED uses Federal Reserve Notes (FRN) to conduct business. FRN’s are used to buy Liberty Dollar currency. This reliance upon FRN’s by a group opposed to FRN’s demonstrates that the American Liberty Dollar monetary system is simply a drain on the United States Government’s monetary system for financial profit via fraudulent means.

Huh? All that NORFED’s acceptance of FRNs illustrates is that the FRN is the dominant money in the United States. How could any enterprise in the United States, whatever its founding philosophy, hope to buy inputs if it refused to accept payment for its outputs in FRNs? No “drain” and no “fraud” is demonstrated by NORFED’s acceptance of FRNs. News flash: the Cato Institute opposes the monopoly of first-class mail awarded to the US Postal Service, and yet Cato has been known to mail first-class letters via the USPS.