Читать книгу New Private Monies - Kevin Dowd - Страница 8

The designers of the Liberty Dollar faced a major technical problem: how could the Liberty Dollar trade at par against the US government dollar, the greenback, when the value of the Liberty Dollar is based on the values of the precious metals, but the value of the US dollar depends on Federal Reserve monetary policy? The way in which the Liberty Dollar handled this problem is very interesting.

Consider that a silver Liberty Dollar medallion with a face value of $10 was minted in 1998 with an ounce of silver at a time when the current market price of silver was about $5 an ounce. The difference between the $10 face value and the $5 cost of the silver input covered costs of production and any minter’s profit, and the medallion itself would be sold for $10 or $7.50 to distributors. Other things being equal, if the market price of silver then remained below $7.50 an ounce, the organisation could continue to mint such medallions indefinitely – and it would keep retailing them for $10, which means that the Liberty Dollar and the US dollar would trade at par, one dollar for the other.

However, if the US dollar price of silver rises – due in the long run to expansionary monetary policy by the Federal Reserve – the profit from minting falls and there comes a point – before the silver price hits $7.50 – beyond which it is no longer economic to continue minting Liberty Dollars. So, if the Liberty Dollar organisation continued to mint such medallions, it would eventually be bankrupted. If the price of silver were then to rise beyond $10, the Liberty Dollar medallions with a face value of ten dollars would have a silver content worth more than $10 and their price against the US dollar would rise: i.e. the Liberty Dollar medallion with a face value of $10 would trade for more than $10.

To forestall such an outcome and maintain parity against the US dollar, once the price of silver hit $7.50, the standard one-ounce silver Liberty Dollar was rebased upwards to have a face value of $20. This entailed the following:

 The Liberty Dollar organisation would now issue one-ounce silver medallions with a face value of $20 rather than a face value of $10 as before, and these were sold for $20 (note that this means that the new $20 Liberty Dollar medallions had the same metallic content as the old $10 Liberty medallions).

 Any holders of the old $10 face value one-ounce silver medallions would be entitled to exchange them for the new one-ounce silver medallions with a face value of $20, since the two have the same content.

The net result is that the Liberty Dollar would remain trading at par7 against the US dollar and, in the process, people holding Liberty Dollars would have doubled the value of their holdings against the greenback. As von NotHaus explained:

The first move up (rebasement) was a big WOW for the Liberty Dollar as the currency actually moved up [against the greenback] as the model called for. And when it did, DOUBLE WOW … people rushed to exchange their $10 Silver Libertys for new $20 Silver Libertys and double their money … it was a smashing success.8

7 Strictly speaking, it would be more accurate to say that ‘in print’ or newly minted $20 one-ounce silver Liberty Dollars would now be trading for $20. However, the older ‘out of print’ $10 one-ounce silver Liberty Dollars would now trade at a new price – approximately US$20 – reflecting the rights of their owners to trade them in for the new $20 silver Liberty Dollars which are now selling at $20. Speaking more generally, since they are also collectibles, the prices of out-of-print issues are also affected by how many of any particular issue are available and the scarcer issues would trade at a premium. Indeed, some were trading on eBay at very considerable prices before the government banned eBay from trading Liberty Dollars on the grounds that they were counterfeit currency.

8 Personal correspondence.