One of the most common questions we hear is, “Why are you selling silver at $25 an ounce when the spot price is only $14.50 an ounce?”
First, for those who do not understand what the Liberty Dollar Network is trying to do, it’s an understandable question. They think of it like trying to sell a gallon of gas for $10 when the gas station is only asking $3, right? If all you see is that you can get it somewhere else for less money, the question makes perfect sense.
The thing is, it isn’t just the silver that we sell; it’s the increased spending power of Liberty Dollars. Liberty Dollars are a privately issued currency that consists of negotiable Silver Certificates, both paper and digital, that are backed by .999 Fine Silver Bullion. Every $25 worth of Liberty Dollars is backed by One Troy Ounce, and the bearer of that Silver Certificate can redeem that silver at any time, on demand. A Silver Certificate is a document of title to a specified amount of silver bullion, so this means that whoever holds that piece of paper (or digital point) is the rightful owner of that amount of silver, and we will be happy to give it to that person any time they want it.
However, we need to go into further detail about that $25 Silver Base, to put at ease the minds of those who wonder what it means.
In order to “back” a currency with a commodity, it is necessary to base the trading power of that currency on something that already has a recognized value. However, if we base the currency on the current market value, then we run into the dilemma of how often the price changes. The market (or “spot”) price of silver usually fluctuates several times a day and can change drastically in a short time, so trying to use that value to base a currency will mean changing its value every time the price itself changes.
Instead, we use a reasonable future value, one that has not been reached recently but is likely to at some point in the foreseeable future. Then, we enter into agreements with Members and Merchants to trade the Liberty Dollars at that value until such time as the price of silver reaches a point high enough to force us to suspend sales; we are a business, and can’t afford to sell silver at a loss, of course. When that happens, we watch the price of silver for a 30 day moving average to determine whether it is time to raise the base, and if we decide that is, then every ounce of silver we hold is then valued at the higher base. Members and Merchants can exchange their old $25 Base Liberty Dollars for new ones at the new base, so that their spending power will keep pace with other rising prices.
We use silver because it has historically, except for a few times when the market has been manipulated artificially through fraud or panic, kept pace with most other commodities. The same money that would buy five gallons of gasoline in 1950 would usually buy an ounce of silver, and the same money that will buy five gallons of gasoline today as I write this will still buy an ounce of silver. It’s the same with most other commodities; you can get as many dozen eggs for the value of a price of silver today as you could in 1950, just as many loaves of bread, etc. By using silver as a base, the buying power Liberty Dollars represent will continue to buy just as much even when the base goes up to follow the patterns of inflation.
In addition to the fact that anyone holding Liberty Dollars has the right to redeem and keep the silver, we also offer a second form of safety net to our Members and Liberty Merchants: the Buy-Back program. This means that Silver Members and Liberty Merchants can, at any time, choose to sell their silver back to us for exactly what they paid for it—or more, if the base has gone up! We pay them the same price they would pay if they were buying it from us on that particular day, so it’s not likely they can ever lose any money.
Liberty Dollars are not Legal Tender anywhere, and are not intended to be any form of competition or replacement for US Dollars or any other form of money. The same applies to our eLD, the Digital Currency our Members use to buy and sell online; it is a way to barter and nothing more, and is dependent on national currencies for its very existence.
The only thing Liberty Dollars offer is a way to conserve your spending power against the return of inflation, and many experts agree that it’s about to come back with a vengeance. Maybe you should think about hedging your wealth with silver, or with Liberty Dollars.
We’d certainly be glad to have you join us.