What's the downside to The Liberty Dollar?

"It sounds so good," you say.

"Make money while spending money. Do good for Austin, and have fun. What's the catch?"

Really, there's no catch. Every Liberty Dollar is a legal contract between you and a warehouse - you can read the contract and know exactly what you're getting. The contract on the back of a ten dollar certificate reads:

This Warehouse Receipt for one (1) Troy ounce of .999 fine silver stored at the warehouse identified below shall expire unless renewed or surrendered within twenty (20) years from date of issue. The undersigned warehouse official certifies that this silver is insured against fire and theft. Storage and insurance fees have been prepaid for five (5) years from date of issue. Thereafter, storage and insurance fees are one percent (1%) per year of the value of silver prorated at the time of surrender. Additional fees limited to shipping and handling may be incurred upon surrender of this warehouse receipt.

(Date)  (Warehouse Official Signature)

That's the whole story. The silver is insured for five years, you can surrender the certificate at any time, and you own the silver. It's all governed by the UCC (Uniform Commercial Code.)

Now, as far as practical matters go, there are a few things you should know:

1. Banks don't accept the Liberty Dollar for deposit in the United States.
Ironically, banks began as deposit warehouses for gold and silver, but they have dropped this service over the years. Therefore, you can't deposit the Liberty Dollar in a bank.

Everybody asks about this. "It's not worth anything, if the bank won't take it," is commonly heard. Well, the bank won't take General Motors stock certificates for deposit either, but that doesn't mean they aren't worth anything! It just means that banks don't deal with them.

"But I have to pay bills and write checks. How am I supposed to do that if I can't put this money in the bank?" You don't pay Visa and the phone company with a community currency. Are they part of your community?  Instead, pay your veterinarian, your favorite Chinese restaurant, your independent bookstore, your gardener. When they get Liberty Dollars, they'll use them to pay the members of their community, who will put them to work in their own community. And so on.

See how it works? By keeping a community currency like the Liberty Dollar out of the banks, you actually strengthen the local economy, keeping money circulating with the people who need it. And by helping to put this community currency into circulation, you can actually make some of the profits that banks typically get.

We're not against banks. We use them ourselves. We just want to create a parallel system that doesn't rely entirely on banks. It's like the difference between the U.S. Postal Service and FedEx. Both do their things in a slightly different way; both are valuable services, and both coexist in the marketplace.

But hey, some bankers are against banks, themselves. Read what then-president of the Bank of England said during a 1920s-era speech right here at the University of Texas at Austin:

"Banking was conceived in iniquity and born in sin. The bankers own the world. Take it away from them, but leave them the power to create money and control over that money, and they will create that money right back again. Take this power away from bankers and all great fortunes will disappear, and they ought to disappear, for this then would be a happier, better world to
live in. My sons should not object; they are well educated and should be willing to take their place in the business world. But if you want to continue to be slaves to the banker and pay the cost of your own enslavement, then let the bankers continue to create money and control credit. However, as
long as government will legalize such things, a man is foolish not to be a banker."

2. You're not buying silver. You're using a silver-based currency.
If you want to buy silver at the spot (or market) price, this is not the way to do it. That's because there's a premium on the price of silver expressed in terms of Liberty Dollars. Whereas an ounce of silver is worth about $5 in Federal Reserve Notes, it's worth $10 in Liberty Dollars. We know this. People wonder about why this is the case. Some people think they are discovering some fraud when they figure this out. Let's put that to rest.

Silver's price fluctuates on the commodities market. Its price goes up and down all the time. If the Liberty Dollar did not have an artificially raised price for the silver that backs it, it would vanish from circulation and get redeemed, melted and sold. As soon as the price of silver went above the price printed or stamped on the currency, people would stop using the currency and would melt it down instead. Think about it. What would you do if you had a stack of one dollar bills that were each worth $20 to a collector? Would you buy groceries with them, or sell them to the collector?

Having the money get melted is obviously not our goal - we want this currency to be used in circulation. So the price on the certificates is higher ($10 per ounce) to give the currency some 'wiggle room.' As the price of silver goes close to $10 per ounce, the certificates' face value will double (this is due to the unique "Silver Base" feature, explained more fully on the Liberty Dollar Web site.) You'll be able to give Liberty Dollars to Austin Silver Center or other Redemption Centers and get $20 for every $10 you give us. Pretty neat, huh? That's why we say the Liberty Dollar is inflation-proof. The dollar price of silver (and gold) rise fairly predictably with inflation. They have risen steadily for almost 100 years, with the exception of a giant spike and subsequent drop in the late 70's and early 80's. When the price of silver goes up, your purchasing power with the Liberty Dollar goes up with it.

The silver backing is there to give the Liberty Dollar a tangible link to the physical world. There can never be more Liberty Dollars than there is silver in the world. This means that there is a theoretical limit to the amount of Liberty Dollars that will ever be in circulation, and therefore the Liberty Dollar is not 'printing press money' and does not cause inflation. That's the only reason money should be made out of precious metals. So that it can't be overprinted like paper money can be. The price of the metal is pretty much irrelevant in the grand scheme of things; it's the scarcity and finiteness of it that really counts.

If you want to invest in silver, buy silver bullion. There are lots of places to do this, and Austin Silver Center can even help you find them on the Web. If, on the other hand, you want to money with the inflation-proof power of silver and the local-economy strengthening ability of a community currency, use the Liberty Dollar!

3. Not everyone takes the Liberty Dollar...yet.
Keep in mind, this is a community currency and banks, big corporations, and governments don't want anything to do with it. That's ok. That's actually part of the benefit. If you're a small business, an Austin resident, a local merchant or artist, or a concerned activist, you'll soon find that the Liberty Dollar is like the Internet - it helps the little guy as much as, or more than, it does the big guy.

When you take the Liberty Dollar, understand that you'll have to save it for yourself, give it to your customers as change, or find a Liberty Merchant in Austin who accepts it. (A list of Liberty Merchants in Central Texas is now online.) Think of this as your good deed for the day: finding a small business, an independent vendor, or a concerned and thoughtful individual and giving them something of value, with self-reinforcing properties, all the while educating them on the nature of money.

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