“…Gresham’s law, holds that bad money drives out good. Mr. von NotHaus has instilled in the government the contrary fear – that good money in the form of silver dollars will drive out the bad money issued by the Federal Reserve…
…Since the collapse in 1971 of the Bretton Woods system that since midcentury had tied most industrialized countries’ currencies to gold, the value of the dollar that the Federal Reserve is supposed to protect plunged 90%, to less than 1/15th of an ounce of silver.”, Seth Lipsky, “A Monetary Gadfly in an Age of Fiat Money”, Wall Street Journal
A Monetary Gadfly in an Age of Fiat Money
Bernard von NotHaus may go to prison for making Liberty Dollars, but he has raised serious currency questions.
By Seth Lipsky
Tuesday morning at 9:30, a federal judge in North Carolina will gavel his court into session to pronounce a sentence on Bernard von NotHaus. A monetary gadfly in an age of fiat money, Mr. von NotHaus, 70, could be looking at the rest of his life in prison.
Nearly four years ago, a jury convicted Mr. von NotHaus of “uttering”—putting into circulation—coins of pure silver that he called Liberty Dollars. The government is also seeking the forfeiture of 16,000 pounds of coins and precious metals whose value it reckons at $7 million.
The federal prosecutor, Anne Tompkins, put out a news release stating that “attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism” and “represent a clear and present danger to the economic stability of this country.”
This is something to think about at a time when the China, the Europeans, the United Nations and various leaders of the World Bank are wondering whether we need a new or better reserve currency. And when Congress is fizzing with disquiet about the dollar.
Mr. von NotHaus suggests that likening him to a terrorist is absurd. “This is the United States government,” he told the New York Times two years ago. “. . . it has nuclear weapons, and it’s worried about some ex-surfer guy making his own money? Give me a break.”
Whether Judge Richard Voorhees will—or should—give Mr. von NotHaus a break, this is beyond a newspaperman’s ken. But it can certainly be said that Mr. von NotHaus has, despite his zeal, done a public service by raising serious questions about U.S. currency.
I have no financial interest in his case. I have never owned a Liberty Dollar, and I have met the coin’s creator only once, over a cup of coffee. My interest is journalistic. The scoop is that Mr. von NotHaus’s Liberty Dollar poses the opposite danger of Copernicus ’s famous monetary principle.
That principle, also known as Gresham’s law, holds that bad money drives out good. Mr. von NotHaus has instilled in the government the contrary fear—that good money in the form of silver dollars will drive out the bad money issued by the Federal Reserve.
Since the collapse in 1971 of the Bretton Woods system that since midcentury had tied most industrialized countries’ currencies to gold, the value of the dollar that the Federal Reserve is supposed to protect plunged 90%, to less than 1/15th of an ounce of silver. The Foundation for Monetary Education calls Federal Reserve notes “legal tender irredeemable paper-ticket electronic money.”
These matters were considered by Judge Voorhees, who has been presiding in the von NotHaus case. They were raised most pointedly in an amicus brief by the Gold Anti-Trust Action Committee, a charity that fights for a constitutional view of money.
That brief argued that Congress lacks the power to prohibit private coinage of money. It argued that the Constitution’s grant of the coinage power to Congress isn’t exclusive. If it were, the Constitution wouldn’t have had separately to deny coinage power to the states.
The fact that the Founders specifically denied coinage power to the states but not to the people means, the line of argument suggests, that private coinage ends up as a right reserved to the people. In fact, private coinage existed long into the 19th century, particularly, but not exclusively, in the West.
Judge Voorhees took a few years to let the post-conviction arguments percolate, but, in the end, he didn’t buy them. In upholding the conviction last month, he conceded that the Constitution doesn’t “expressly state” that the coinage power belongs exclusively to Congress. But he went on to assert that the exclusivity can be “reasonably inferred” because the power is prohibited to the states.
The judge accepted what he characterized as the “jury’s implicit finding” that the “Liberty Dollar is counterfeit despite its intrinsic value.” He was unfazed by the fact that the Liberty Dollars during much of the past decade had been worth more than their face value and more than Mr. von NotHaus sold them for.
One “weakness” in the intrinsic-value argument, Judge Voorhees wrote in sweeping aside the constitutional objections, is that “von NotHaus and his organization were making money off their sales of the Liberty Dollar.” If that’s such a crime, though, what is one going to do about the director of the United States Mint?
The U.S. Mint, after all, is hawking a “50th Anniversary Kennedy 2014 Half-Dollar Gold Proof Coin” for $1,165. The mint boasts that the coin, featuring a relief of the bust of the 35th president, contains “Three-Quarter Ounce of Pure, 24-Karat Gold.” So it’s selling the coin at a 29% premium over the price of gold.
It isn’t my purpose here to suggest putting the director of the Mint in jail. Or even to suggest that Judge Voorhees failed to apply the law. But “if the law supposes” what the judge has found here, then Mr. Bumble in Charles Dickens ’s “ Oliver Twist ” had it about right: “the law is a ass.”
“The worst I wish the law is that his eye may be opened by experience,” Mr. Bumble added. Not bad advice for this astonishing case. If Mr. von NotHaus is sent to prison, justice will have to come from a higher court—or even from Capitol Hill.
Congress, as it turns out, has got the matter in its sights. It is considering H.R. 77, a bill called the “Free Competition in Currency Act” sponsored by Rep. Paul Broun (R., Ga.). It is a radical measure that brings to our laws the ideas of Friedrich Hayek, the Nobel-laureate economist who came to favor the denationalization of money.
H.R. 77 would end the legal-tender laws, repeal the provisions of the federal criminal code used against Mr. von NotHaus and nullify “any previous convictions.” The website govtrack.us reckons that its chances of passage are zero.
Things can change, though. “Audit the Fed,” which started out as a hyper-long shot, passed the House in September in a 333-92 vote. Monetary measures will have better chances in the 114th Congress. And the septuagenarian Mr. von NotHaus, who faces up to 22 years in prison, could yet appeal.
Mr. Lipsky is editor of the New York Sun (www.nysun.com).