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Constitutional education, history, commentary, reform, compliance, and interpretation.

2011/03/21

"Liberty dollar" coinage defended

The arguments made against Bernard von NotHaus and the "liberty dollar" coinage are incorrect, for several reasons.

The U.S. constitution, Art. I Sec. 8, provides in part:

The Congress shall have Power ...

[5] To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

[6] To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
And in Art. 1 Sec. 10, it provides in part:
No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;
Which leaves it open for private parties to coin money, and does not provide authority for Congress to make anything legal tender, except perhaps on territory over which it has exclusive legislative jurisdiction, which excludes state territory.

However, in the Seventh Amendment, it also states in part:
In Suits at common law, where the value in controversy shall exceed twenty dollars ...
Thereby fixing the meaning of "dollar" to be what it was as of 1791, which was 371.25 grains of silver, alloyed into a coin of 416 grains.

The question for the court was whether the "liberty dollar" in any of its forms was in conflict with any of the above, or subject to criminal prosecution. I find none of the coins produced by Norfed, many of which I have in my possession, were in conflict.

First, the only penal power of Congress was to punish "counterfeiting" of "Securities and current Coin of the United States". None of the liberty dollar coins in any way resemble "current Coin of the United States" closely enough. The closest coins minted by the U.S. were silver dollars from the early 20th century, which contained less silver than the liberty dollars did. It can't be "counterfeit" if the quantity or value of the precious metal content is greater than that of the coin "counterfeited".

However, the prosecution was not really for "counterfeiting", but for making coins "resembling and similar to United States coins". Putting things like "dollar, USA, Liberty, Trust in God (instead of In God We Trust); and other features associated with legitimate U.S. coinage", as the DoJ press release proclaimed, does not constitute resemblance close enough to any actual U.S. coins to be "counterfeiting".

One might argue that the charge was really for fraud. Allegedly because the coins were marked with estimates of the bullion price of the coins denominated in federal reserve notes. I cautioned Bernard von NotHaus that that was a bad idea, because bullion price was changing too much, and it served to validate federal reserve notes, which Congress has no authority to make legal tender on state territory. I recommended he just mint "constitutional dollars" containing 371.25 grains of silver, and alloy it to 416 grains to make the coins more durable, as was the original practice. Persons using them in trade would then have to explain about bullion prices and the markup on them to make them available in the form of coins, but most people would get that. Of course it is always possible for ignorant people to deceive themselves, but I find nothing fraudulent about any of the representations or practices of Norfed or its principals.

Moreover, Congress has no authority to prosecute anyone for fraud on state territory, and Norfed was not operating on non-state U.S. territory. Some of his dealers might have been, but not Norfed or its principals directly, and they are not responsible for what their independent dealers might do. Congress also does not have authority to prosecute anyone for conspiracy or complicity, in connection with any crime. That was debated in the Tenth Congress and decided there. The Necessary and Proper Clause, as originally understood, does not support that.

Contrary to the DoJ press release, Congress has no "concurrent power to restrain the circulation of money which is not issued under its own authority...." Proclaiming that is a flat-out lie. It is also a lie that "It is a violation of federal law for individuals, such as von NotHaus, or organizations, such as NORFED, to create private coin or currency systems to compete with the official coinage and currency of the United States." The statute charged, 18 USC 486, states:
§ 486. Uttering coins of gold, silver or other metal

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.
But that is unconstitutional as to "original design". The resemblance needs to be so close that only close examination can tell the difference, and the value needs to be less than the coin "resembled", not greater. To allow for broader construction makes the statute void for vagueness.

Summarizing:

(1) The power of Congress to coin money is not exclusive. The power is denied to the states, but not to private parties, and in fact from the beginning most coins were minted either by foreign or domestic private mints, although the foreign ones did so under charter of their governments.
(2) The power to regulate the value of coin is also not exclusive to Congress, but that power is only to prescribe that coins contain at least the weight of precious metal they indicate on their face. States may exercise that power so long as it does not conflict with the power of Congress. It is not the power to regulate the exchange rate with other things, such as FRNs.
(3) Congress has no power to make anything legal tender for the payment of debts on state territory, only on territory under its exclusive legislative jurisdiction, such as federal enclaves (Art. I Sec. 8 Cl. 17) or incorporated territories (Art. IV Sec. 3 Cl. 2). The Legal Tender Act making FRNs legal tender is unconstitutional if applied to state territory.
(4) Most states (e.g., Texas) have not defined anything to be legal tender, implicitly yielding to the federal definition, but that means, constitutionally, that there is no legal tender on their territories.
(5) The power to make something legal tender, even if it exists, is not the power to forbid anything else from being used as money. Money is whatever anyone will accept in exchange for goods and services, and there is no power to regulate what that might be.
(6) Prosecution of the Norfed defendants was not based on resemblance of their coins to Silver Eagles, but to quarters, which they do not resemble in size or engraving. An essential element of resemblance under the authority to punish counterfeiting is that they indicate a weight of precious metal greater than they contain. It is not counterfeiting if they contain as much or more, no matter what else is imprinted on them. § 486 was written at a time when coins did not indicate the quantity of precious metal explicitly, but only by denomination, and it is unconstitutional if applied to coins containing more. It is also unconstitutional on the point of "intended for use as current money", because Congress has no power to punish for intentions, especially when the intentions are on the part of persons other than those who did the minting.

Clearly, this was a political show trial, not a valid enforcement of constitutional statutes. It needs to be reversed on appeal.

There is a good discussion of the case here.

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