Gotta LUV this one(g) HONOLULU ADVERTISER, Dec 7, 1998 (Section C) with color pictures of the 'notes'!
Y2K buck stops here
New currency is testing its metal against millennium bug
--by Will Hoover, Advertiser Staff Writer
Call it Y2K Crash Cash. Call it Millennium Meltdown Moolah. Call it Year 2000 Crisis Scrip. Just don't call it legal tender.
It is American Liberty Currency -- an alternative loot that has been
competing dollar for dollar with Federal Reserve notes since Oct.1
(although so far, few folks have heard of the stuff.)
Still, those who believe in "America's only silver-backed currency" claim it could be the monetary solution to a looming economic disaster that may engulf the nation beginning Jan.1, 2000.
Unlike the Fed's greenbacks, American Liberty Currency is backed by
precious metal. ALC Silver Certificates can be redeemed for silver at any of more than 60 redemption centers around the nation, three of which are in Hawaii.
And the man whose signature is affixed to every ALC certificate is Hawaii resident Bernard von NotHaus. "The first question people ask is, 'Is it legal?' The answer is yes," said von NotHaus, owner of the Royal Hawaiian Mint.
In a lengthy, published legal opinion regarding American Liberty Currency, Kauai attorney Paul Sulla recently concluded that the currency "is a valid negotiable paper instrument under the provisions of the Uniform Commercial Code and its intended use protected by the bearers' right under the United States Constitution."
There are, in fact, dozens of alternative local currencies in the country right now-- the most famous of which has been circulating in Ithaca, N.Y. since 1991. Neither the federal government nor the Internal Revenue Service prohibits such currencies as long as they don't resemble Federal Reserve notes and appropriate taxes are paid. But ALC certificates are nationwide, and they appear to be the only currency in the country backed by a precious metal.
That's what makes them special, says von NotHaus, who is the senior
economist of a nonprofit organization called NORFED that, frankly, is fed up with the Fed. NORFED stands for the National Organization for the Repeal of the Federal Reserve Act. Von NotHaus says NORFED was
incorporated in September by a group of "concerned, dedicated citizens" who abhor legal-tender laws and who believe the nation's money supply is doomed because it is perpetually inflationary and not "value backed."
Why would von NotHaus and his colleagues want to repeal the Fed? Because, he says, it's a scam. Citizens are led to believe that the Federal Reserve Bank is a regulated governmental operation. Fact is -- as any encyclopedia points out -- the Federal Reserve is an independent agency.
"It isn't federal, it has no reserves, and it's not even a bank," said von NotHaus. "The truth is that the Federal reserve is a private company that manipulates the economy for the profit of its owners at the expense of American people." Greenbacks are legal-tender fiat notes, meaning that while they have no intrinsic value, they must be accepted in all commercial transactions. Not a very inspiring currency to von NotHaus' way of thinking. "It's inferior," he said.
On the other hand, von NotHaus is not able to name a single location in Hawaii that accepts American Liberty Currency. "This currency has only been out since Oct.1," he said. "So asking who accepts it is like asking why a 4-month-old baby can't toss a 60-yard touchdown pass. It's simply too early. There needs to be more currency out there. We need to open more redemption centers."
"And," he adds after a pause, "we need a really good, old-fashioned panic."
Von NotHaus believes just such a panic is about to make itself available: Y2K, or the 'millennium bug,' as it has been called. "This," he said, holding up a crisp American Liberty certificate, "is Y2K money."
By now, most everyone has heard the nightmare scenarios about what could occur if confused computer systems can't interpret the year 2000 (millions of computers and chips can only comprehend two-digit years -- 98 for 1998, 99 for 1999, etc., and will either interpret the year 2000 as 1900, or stop working).
Von NotHaus is not necessarily predicting wholesale cataclysm, but he does predict that millions of Americans, unwilling to risk their life savings, will pull at least part of their money out of banks. Such a run could be enough to destabilize Fed notes. If citizens lose faith in greenbacks, which have no intrinsic value in any case, then American Liberty Currency -- which claims to be 100 percent packed by pure silver -- could save the day.
"What we're talking about here is returning the ownership of money back to the people," said von NotHaus. "This currency is a warehouse receipt that gives the bearer title of ownership. When the people own the money, they control the government. When the government owns the money, such as in the case of the Federal Reserve notes, the government controls the people."
ALC certificates are not an investment. They are simply an alternative currency. Although they are not legal tender, they can be used in any manner Fed notes can be used -- except that there is no legal requirement that they must be accepted. The main difference is that they are backed by precious metal. Currently, silver has a market value of around $5 an ounce. But ALC certificates are tied to an amount of silver, not the market value of silver, which in the past two decades has fluctuated from less than $5 to around $50 an ounce.
According to von NotHaus, every $10 ALC certificate is backed by a single ounce of pure silver stored in vaults at Sunshine Minting in Idaho, a large private mint that manufactures silver coins for businesses and governments all over the world. That $10 amount includes the price of the silver plus the costs of minting and storing NORFED's Silver Liberty ounces, printing ALC currency, and such things as distribution, insurance, bookkeeping, etc.
Once a $10 ALC certificate has been printed, dated and signed, it's tied to one ounce of silver for 20 years -- however high or low the price of silver might go. After 20 years, unless renewed or redeemed, the certificate expires. The system has built-in checks and balances to assure that the currency can't be inflated by issuing more warehouse receipts than there are ounces of silver backing them. Those measures include monthly independent audits and storing the silver in tamper-proof boxes before the corresponding certificates are issued. Aside from that, von NotHaus says, should any ALC holder ever be denied silver, confidence in the value of the currency would evaporate -- defeating the very purpose of the currency.
The high-quality certificates -- complete with holograms, micro-printing and some anti-counterfeiting tricks the Fed's own new money doesn't have -- are printed by Verify First Technologies of California. Although von NotHaus designed the certificates, his own mint has nothing to do with printing the ALC certificates or minting the Silver Liberty ounces. Compared to Fed greenbacks, some $260 billion of which are in circulation, NORFED's $50,000 in circulating currency seems virtually nonexistent.
But that could change should the public decide it wants a value-backed
currency, says author and documentarian G. Edward Griffin, who has written extensively about money and has long advocated an American currency that's 100 percent backed by a precious metal. Griffin admits that even he thought American Liberty Currency was a 'hare-brained idea' when he first heard about it.
"I didn't actually think anyone would ever do it," he said. "I did look at it very carefully."
Griffin's conclusion is that ALC certificates are a genuine free-market currency and, as such, will be governed by the laws of supply and demand. In other words, the market itself will decide the currency's success or failure, he says. "How can you argue with that?" said Griffin.
American Liberty Currency may have time on its side -- especially if Y2K becomes a frightening reality. Von NotHaus also believes he has history on his side. "Money has been around for thousands of years," he said. "And while no currency truly backed by precious metal has ever failed, in the long run no fiat legal tender has ever succeeded." |
