A New World Currency, The Valun Mutual Money Plan As Conceived By E. C. Riegel
Currencies / Fiat Currency Aug 28, 2009 - 04:36 AM GMT
The current economic crisis has brought into broad focus the failings of Government issued money. As pointed out brilliantly by E. C. Riegel in "Flight From Inflation" and "A New Approach To Freedom", the failure of a fiat currency is that it is issued by institutions that provide no enterprise value and thus cause inflation. Inflation is a tax, pure and simple. Debt monetization is deferred bankruptcy. Bankruptcy leads to usurpation. Usurpation can only lead to either of two ends: war or tyranny. Tyranny will take either of three forms: Socialism, Communism or Fascism. All three metastasize through political money. Its enemy is enterprise money.
In the 1950's Riegel developed a precise plan for a new World currency called the VALUN. (Many suggest that it should now be called the Riegel in honor of E.C.) By ensuring that only "free enterprisers" can issue this money a stable new monetary medium can be created which will provide a safe harbor for middle class entrepreneurs seeking refuge against the storms of socialist fabianism. To be successful fabianism must destroy free commerce and free agriculture.
The Riegelian idea of a new commercial world currency is not fantastic. Its genius is based on its practicality. This new enterprising medium of exchange will not be issued from the top down: it can grow organically from the bottom up. Business circle by business circle. Chamber of commerce by chamber of commerce. Community by community. City by city. County by county. When it is seen to work it can then be promoted to be adopted state by state. As once explained by a wise council, it is human nature to follow, but very few lead with originality.
With the advent of computers, networks, and broadband never has the concept of clearing circles been more feasible. The software is now readily available. What's needed are desire, leadership and measured action, consistently moving with belief and a vision of germinating a solution. And boy what a solution. (Talk about seeking a meaning to life.)
As an ideology dedicated to providing an alternative to big government never has an applied philosophy of freedom been more urgently sought.
Accordingly, presented below is the plan in its original. With the experience of history, particularly with that of the WIR system in Switzerland, this plan could be somewhat modified but in essence it is still brilliant.
VALUN MUTUAL MONEY PLAN
To establish a sound money unit with a constant purchasing power and a money system that will prevent booms and depressions, inflations and deflations, and assure constant prosperity and universal circulation, the following plan is proposed.
Name of the Unit
The proposed name of the new money unit is valun, a word compounded from VALue UNit. It will appear in all desired denominations of bills and coins, and checking accounts will operate like the present.
Valun Exchange
The central clearing house through which checks are to be cleared and from which the currency bills and coins will be obtained will be called the Valun Exchange.
How It Will Start
The ideal institutions to start the system are department stores because their lines of merchandise are so inclusive; and they are well known to the public. They would not sponsor anything that is not sound and in the public interest, and with their endorsement the people would have confidence in the new money.
Forming the Exchange
The firms that desired to initiate the system would form themselves into a Valun Exchange and adopt rules governing the operation thereof.
Mutual Credit
The members of the Exchange would agree on the line of credit for each (probably a percentage of their previous year's business). This means that each member would be allowed to draw checks in valuns up to the stated credit limit. Checks would be convertible into currency.
Dollar Pool
To quickly establish public confidence in the new currency, the members would agree to pay into a pool, one dollar for each valun issued. This pool would be used to guarantee to any holder of valuns that he could get dollars in exchange, unit for unit.
General Acceptance
All the members would announce to the public that they would accept valuns the same as dollars in their business, or would exchange dollars for valuns. The effect of this would be to make valuns acceptable to other tradesmen who are not members of the Exchange. The currency bills would carry the legend: This bill will be accepted in exchange for goods and services or for a dollar bill of the same denomination by the firms whose names are printed on the back hereof.
Issue
Issue of valuns would, of course, be confined to members who had agreed to the dollar pool. They would write checks for their purchases, and would cash checks in the regular way for payrolls.
Pool Cages
The dollar pool would set up cages in the department stores where dollars would be available to all on demand, in exchange for valuns.
Spread of the System
Because of the dollar pool guarantee, any merchant and employee would accept valuns and thus there would be many merchants besides the sponsors who would trade in valuns. No one would, of course, be obliged to do so, except for competitive reasons. Such dealers could open checking accounts in the Exchange but would not have credit, and, of course, would not pay into the dollar pool.
End of First Phase
The first phase is intended merely to demonstrate the feasibility of the plan and to win public confidence and to lead to the accomplishment of the ultimate purpose of the plan, which is to completely separate the valun from the dollar and all political money units. The time when this can be accomplished will be automatically determined by public reaction.
Parting of the Ways
It should be noted that the dollar pool will buy Valuns with dollars but not dollars with valuns. In other words, the valun will be guaranteed to not fall below the dollar, but there is nothing to guarantee the dollar from falling. In fact, the dollar is sure to fall, and that is the main reason for starting the valun system - to protect valun users against inflation and to maintain a constant price level.
Example
At the outset all goods will be priced the same in dollars and valuns. For instance, a pair of shoes will be priced $10 and V10. In due course the inflationary factor in the dollar will cause the dollar price to rise to say $10.50 but the valun price will remain V10. Thus the public will discover that the valun is worth $1.05 and will refuse to exchange one valun for one dollar. From then on the disparity will increase and therefore, the dollar pool will have served its purpose and may be dissolved and the dollars and valuns contained therein, returned to the sponsor depositors.
Thereafter the valun and dollar will each be on their own.
The valun will become the storm center to escape the inflation storm and people will turn to it in self defense.
Why Price Disparity
That prices should rise in one unit and not in another, or more in one than another, may seem puzzling, but that is going on all over the world. The dollar is the most nearly stable unit in the world. Therefore, prices are rising in terms of other units more than in dollar terms.
When the valun is launched, it will be more stable than the dollar, and will in fact be the only stable unit in the world. The stability of a unit is determined by its issue policy. The issue policy of the valun is that its issuers are solely private enterprisers who issue it only for purchases of actual values under competitive conditions. The issue policy of a political unit is that it may be issued for any purpose by the government including all kinds of non-productive projects. There are billions of dollars issued against no production - hence the inevitable inflation. Every valun issued will be against actual value received by the issuer. Thus there will be many more dollars than valuns bidding for the same goods, with the result that dollars will decline in power while valuns will remain stable.
The Permanent Set Up
The permanent organization of the Valun Exchange should include any person or organization. Membership should be of two classes: the A members, those who are allowed credit, which means the power to overdraw the checking account and thus create valuns; the B members, those who will have the depositing and checking right without the overdraft right. It is proposed that the territory of each Exchange be the state in which it is located. Any person or company in the world should be eligible for class B membership in any Exchange but will naturally choose the nearest, and as membership in any locale justifies, a local Exchange will be opened. Exchanges would be mutually owned by their members without capital, acting essentially as central bookkeepers and clearing houses.
Governments
National, state and local governments should be admitted as members of any Exchange but should qualify only as class B members without the power to create valuns. So far as valuns are concerned, governments should be obliged to balance their-budgets by denying them the over-draft power.
International Exchange
There should be one Exchange devoted to international trade to enable any trader anywhere to draw a check in favor of any trader anywhere else. This Exchange should be confined to class B membership. Any credit that an international trader is entitled to would be secured through some other Exchange and transferred to the International Exchanges to be drawn against.
International Governing Board
Each Exchange would have a representative on an International Governing Board that would determine matters of universal interest and regulation. Effort should be made to permit each exchange to have autonomy within proper limits.
The most important question upon which men differ is credit policy. The Governing Board could set what is deemed to be the most conservative policy and provide therefore a minimum percentage to be charged for loss insurance, and from there up graduations of more liberal policies, with appropriate percentages for loss insurance for each. Each Exchange could then choose its own credit policy. The appropriate loss insurance percentage would then be added to the check clearing charge. Thus members of the various Exchanges would pay more or less as their policy was more or less conservative.
The insurance fund thus set up against defaults would be held by the Governing Board subject to draft by any Exchange to cover any loss from credit default.
Members' Charges
It is contemplated that the expenses of the Exchanges would be borne by the members through a per check charge for all checks cleared, thus each would pay in ratio to service received. No interest charge is contemplated for debit balances and there would be no loans in the present banking sense, and of course no notes issued.
Currency
The currency bills and coins should be printed and minted by the Governing Board and supplied to Valun Exchanges, so that they would be uniform the world over.
Accomplishments
The project of course encompasses an economic world revolution and it is difficult to forecast all the consequences. The following is a catalogue of obvious accomplishments:
1. Provide a stable price level.
2. End the debt-money system. Credit would be extended solely upon the ability to deliver goods and services.
3. Abolish interest within the system.
4. Take the money-creating power out of the hands of government and banks and place it in the hands of private enterprisers.
5. Make government operate on a cash basis; prevent deferred and delusive taxes through inflation.
6. Assure distribution of goods by distributing money power.
7. Prevent inflation and deflation; boom and depression.
8. Defeat bureaucracy, fascism, and communism by taking the money power from government.
9. Defeat hidden money control from any quarter.
10.Assure full employment and a high standard of living. Give the people the veto power over war and government extravagances.
11.Supply the perfecting element in democracy and private enterprise.
12.Unify commerce in one world of business, in spite of the separatism of politics.
Copied From The Papers Of E.C. Riegel Which Are Freely Available On The Web.
Permission Granted By Spencer Heath MacCallum 25th. August 2009
By Christopher M. QuigleyB.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie
Mr. Quigley is 46 years of age and holds a Batchelor Degree in Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in San Francisco, California where he lived for 6 years. Now based in Dublin, Mr. Quigley actively trades utilising the principles set out in the modules above. This Wealthbuilder course has been developed over the last 9 years as a result of research, study, experience and successful application.
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