The WaPo story on Liberty Dollars ("the only thing Liberty Dollars buy in these parts is a jail term") is either very incomplete or just wrong.

Privately issued money is entirely legal in the US, provided a few technical requirement are met to prevent it from being confused with actual US currency. Moreover there are a bunch of private monies in use out there, and have been for a long time. (Check out Ithaca Hours)

The Fed even has a publication explaining them, in case you want to start your own, from which...

"Private money is not prohibited if it complies with certain government regulations. It must be smaller in size than US currency and issued in denominations of a minimum of $1...."

The WaPo story gives the strong impression that using a private money like Liberty Dollars can "buy users a prison term" because it is "phony money". But that's just not so.

The fact that private money isn't legal tender does not make it illegal -- it only means people must agree to its use voluntarily, nobody can be compelled to accept it.. If they do agree to accept it in exchange or as payment of a debt, no problem, that's a contractual agreement just like agreeing to accept euros or yen or a gold watch or a used car or whatever else in an exchange or as payment of a debt. And there's nothing illegal about asking merchants to do so.

If there is anything illegal about the use of Liberty Dollars it would be that some users are trying to palm them off on merchants by confusing them with US currency, so somebody feels compelled to accept them. But the WaPo story also reports that the issuer has taken pains to avoid just such confusion....

"Norfed Executive Director Michael Johnson says the group isn't aiming to overthrow the American monetary system. 'We're not locking horns with the Fed. I mean, that's crazy,' he said... Norfed struck the first gold- and silver-backed coins -- which, to avoid charges of making its own money it calls 'rounds' -- in 1998 ...."

If that's the case -- that Liberty Dollars aren't being confused with US currency -- then the WaPo story hasn't revealed anything illegal that's going on here. Simply getting the claimed 2,500 merchants to accept them certainly isn't illegal. The Fed itself says so. So what is?