Metal-backed currency vs. violence-backed currency
The people behind the Liberty Dollar have been arrested for competing with government issued paper currency, by issuing their own commodity-backed currency. Fiat currency is essentially backed by violence, in that if you don't accept it for payments (as a merchant) or try to compete with it, you will get tossed in jail. It is not used because it is superior, it is used because people with guns will stop you if you try to offer an alternative.
This is, fundamentally, how government works. By offering inferior services and threatening to put anyone who competes with them in a cage. (Well, ok, also by occasionally offering genuinely non-excludable / natural monopoly / public goods. Shoddily.)
Acting U.S. Attorney Edward R. Ryan of the Western District of North Carolina said, “When groups seek to undermine the U.S. currency system, the government is compelled to act. These coins are not government-produced coinage, yet purchasers were led to believe by those who made and sold them that they should be spent like U.S. Federal Reserve Notes. Such claims are in violation of federal law.”
It's absurd to claim that any alternative currency producer says that their currencies will be accepted universally, like violence-backed currency. Alternative currencies come with caveats, including the Liberty Dollar.
The indictment alleges that the purpose of NORFED is to mix Liberty Dollars into the current money of the United States, and further alleges that NORFED intends for the Liberty Dollar to be used as current money in order to limit reliance on, and to compete with, United States currency.
Oh no, we can't have businesses limiting reliance on and competing with US currency! We can't make it compete by being desirable, we have to eliminate competition with violence.
The indictment alleges that members affiliated with NORFED sell the Liberty Dollar coin at a greater price than they pay for it, and that the profit for these individuals is the difference between their discounted purchase price and the price for which they sell the coin. Additionally, according to the allegations contained in the indictment, a person who is not affiliated with NORFED pays the face value minted on the coin.
This is why I wouldn't buy Liberty Dollars - they don't sell for true value. (This is done in order that the conversion to regular dollars not change constantly with every fluctuation of the metal price. It brings a big benefit in convenience, but I still don't like it. I'd rather let a computer convert my purchase price based on current spot prices, and have metal coins that are worth their full weight). But it's comically absurd for the people who print Federal Reserve Notes, and pocket a profit equal to the full face value minus tiny printing costs, to complain about people making a profit from a currency.
And the most absurd statement of all:
“People understand that there is only one legal currency in the United States. When groups try to replace the U.S. dollar with coins and bills that don’t hold the same value, it affects the economy. Consumers were using their hard-earned money to buy goods and services, then getting fake change in return,” said Owen Harris, the Special Agent in Charge of the Charlotte Division of the FBI.
That's right, metal-backed currencies don't hold the same value as violence-backed currencies. The former, everywhere and always, appreciates relative to the latter. Put another way, the former holds its value while the latter dwindles away. What a disingenuous comparison - or perhaps he is so utterly ignorant of the nature and history of money to have meant the reversed meaning.