Liberty dollar (private currency)
The Liberty dollar is an alternative form of currency issued in the United States by a non-profit organization known as NORFED. The paper currency is backed by precious metal (silver and gold bullion) and is redeemable when presented at a NORFED Regional Currency Office. The coin currency is minted from pure silver or gold.
NORFED stands for National Organization for the Repeal of the Federal Reserve Act, whose stated goal is to encourage use of the Liberty currency and to highlight the fallacies of the U.S. Federal Reserve "fiat currency."
Legality
Just as many states, banks, and local communities once issued their own currency in the past, the Liberty dollar is a legal form of currency and is not considered counterfeit by the U.S. Government. According to NORFED, the currency was submitted to the U.S. Treasury Bureau of Engraving & Printing for review, which verified the legal legitimacy of the currency.
Concept
The Liberty form of currency is designed to be interchangeable on a $1 to $1 basis with Federal Reserve notes. Since the Liberty dollar is based on actual gold or silver, the value of the currency fluctuates depending on the value of the metal in Federal Reserve notes. Such fluctuation ensures that the silver or gold behind the Liberty currency retains its buying power, but is reflected only when the value of the metal goes up sufficiently for there to be a large difference in the value of the Liberty and the Federal Reserve note. For example, silver coins minted with a face value of $10 are re-minted at $20 when the value of the silver in the coin goes up sufficiently. The value of Liberty paper currency is similarly redeemed and reprinted as necessary.
Security
Liberty silver and gold coins are minted from .999 pure silver, or .9999 pure gold. Modern security features are built-in to Liberty paper currency. However, due to the lack of public exposure of Liberty currency, it would be difficult to distinguish real currency from counterfeit.
Liberty dollars in the Marketplace
NORFED maintains a list of merchants who specifically accept the Liberty dollar, however, the organization encourages the tendering of Liberty currency for all purchases. Surprisingly, a high number of merchants will accept Liberty coinage without realizing the money is not produced by the Federal Reserve. Undoubtedly, businesses will experience problems when their bank rejects the coinage for deposit. Some businesses tender the coins back out to customers, or redeem the Liberty dollars for Federal Reserve currency through NORFED. Others, however, train cashiers to not accept Liberty currency. Due to the Liberty dollar's limited circulation, the full retail reaction to the currency remains to be seen.