The New Counterfeit Money
ROBERT SMITH, host:
Last week there was a story that just fascinated us here at the BPP.
Federal agents reportedly raided the offices of the Liberty Dollar. This is an alternative currency advocated by a Libertarian activist. Now we looked at these coins on line and they look a lot like the U.S. mint coin: there's lady liberty on one side and there's a torch on the other. But there are some crucial differences, you have to look closely, it says: Trust in God, instead of In God We Trust.
ALISON STEWART, host:
SMITH: And the makers claim that these Liberty Dollars are backed up by gold and silver not so much the U.S. dollar anymore.
The man behind the Liberty Dollar, Bernard von NotHaus says once this gets to court he plans to, quote, "put this country's monetary system on trial."
Well, here at the BPP we're not exactly ready for a trail, but we had a lot of questions about this. At what point does making a few coins become an alternative currency, and at what point does that become illegal?
Well, we discovered - calling around there some very few people who know the answers to these kind of questions and we found one. His name is Walker Todd, former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland and he's currently a research fellow at the American Institute for Economic Research.
Mr. WALKER TODD (Research Fellow, American Institute for Economic Research): Hello, how are you?
SMITH: I'm doing good. We had some questions here. I mean, first of all, have you ever seen one of these Liberty Dollars?
Mr. TODD: Yes I have.
SMITH: You've actually handled it or just seen it online?
Mr. TODD: Yes. One was given to me and so I've actually seen it, yes.
SMITH: Now according to a seizure warrant that libertarian group had posted online, Liberty Dollars folks are under suspicion of mail fraud, wire fraud, money laundering. What do you make of this whole situation?
Mr. TODD: The response of the government this time is interesting and large, and I think the treasury must be taking this very seriously for whatever reason they decided that this had crossed whatever lines that they had tolerated in the past from private currency issues. So they - I think it is a fairly serious effort. Reading the news accounts about it, it does appear that they've - the authorities have made a major effort to shutdown the business operation, at least temporarily.
SMITH: Sure. And in the affidavit they sort of say that it's so similar that it's almost counterfeiting. But it made us wonder, is the federal government the only people who can actually mint coins? I mean, can't we do this in our backyard?
Mr. TODD: Right. This turns out to be the $64 question in this whole affair. You've all seen ads for the Franklin Mint and the…
SMITH: Sure. Yeah.
Mr. TODD: …of the private mints that will stamp out coins that are in about the same size and shape of a, sort of, our…
SMITH: Commemorative coins? Yeah.
Mr. TODD: In essence, that's all these things are. The difference is that Franklin Mint coins, for example, would not be intended to circulate as currency, while it's very obvious that the promoters of the Liberty Dollar do intend that it circulate as an alternative currency. And that I guess what attracted the treasury's attention in this case.
SMITH: Well, Walker, last night I was busy minting my own coins. Here.
(Soundbite of coins)
Mr. TODD: Mm-hmm.
SMITH: You can hear this right here. I made a BRYANT PARK PROJECT currency and one side it says BRYANT PARK 2007 and there's a…
STEWART: I'm sorry, sir. We apparently have a lot of time in our hands…
SMITH: I just want to see if he could do it.
STEWART: …that we're making false currency.
SMITH: It's not false currency it's alternative currency. It says BRYANT PARK on one side. It has a picture of our host Alison Stewart. On the other side it says BPP, one dollar and there's a picture of our outgoing host, Luke Burbank, making it a collector's item. So did I break the law by making - it's bigger than a dollar, it doesn't look like a dollar but I called it a dollar.
Mr. TODD: Right. And that also is one of the things that will attract the treasury's attention.
(Soundbite of laughter)
Mr. TODD: The idea is if you call it one of the coins or fractional coins of the United States - the same name, dollar in this case, is going to raise other issues. Suppose, for example, you'd only stamped on it one ounce of fine silver, right? And you left off the denomination then you might have been within the edges of what the law would allow. But you raise at it an important earlier question. The federal statute depending on how it is interpreted seems as though it might prohibit the minting of any coin of the same size and shape as a regular U.S. coin regardless of whether it says dollar on it. And that's an eyebrow raiser because it does seem like a total prohibition of any private minting effort.
SMITH: Sure. And if they have copyright on the shape round, you know, that's pretty much what you'd expect the coin to be.
Mr. TODD: Right, right. Luke, can't call it a coin exactly because that would lead people to think that it's intended for circulation against U.S. currency and things of that sorts. You have to call it a round or something else that's not a coin.
SMITH: Well, you know, there are a lot of alternative currency systems out there were people can actually use them for goods and services. I remember one in Seattle, there's one in the Berkshires in Ithaca. And these are various forms of basically time dollars, IOUs, that people can do public services and get these coupons and then use them to buy things. I mean, the functioning money, is that legal?
Mr. TODD: I used to think so.
(Soundbite of laughter)
Mr. TODD: Prior to this. But - and they for one thing they don't call them dollars. In Ithaca, for example, at least they call them Hours - related to a concept that you work for an hour you earn the value of a coupon worth x dollars in Federal Reserve notes. And so the currency out there is stamped Ithaca Hours and so it's harder to confuse those with regular U.S. dollars.
SMITH: Sure. And what do they call Berk Bucks, or?
Mr. TODD: A Berk Shares.
SMITH: Berk Shares, something like that.
SMITH: So it seems like - it seems like a lot of this is really the power is in a name and an illusion because after all, I mean, money is sort of a collective illusion.
Walker Todd, former assistant general counsel and research officer at the Federal Reserve Bank and currently the American Institute of Economic Research, thanks for joining us.
Mr. TODD: Thank you.
STEWART: You know it's very complex. Now I know why there's only about five people who can understand it and know what to do and say about it.
SMITH: Exactly. Well you can look at these BRYANT PARK - I'm sorry BRYANT PARK Bippies(ph)…
STEWART: Bippies - is that what we're calling it?
SMITH: You can look at the Bippies online. We have it up on our Web site now. They are attractive. And if you want to buy one, it goes for a dollar.
STEWART: I don't know if I like having my face one Bippies.
(Soundbite of laughter)
SMITH: That's why we waited until people die before we put them on coins because nobody likes the way they look on a coin.
STEWART: Coming up on THE BRYANT PARK PROJECT: A super secret poll done in Cuba about what Cubans think about the current government. The results? Surprising. The methodology? Interesting. We'll find out more. Stay with us. We'll be back in about 60 seconds.
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