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Posts tagged ‘Purchasing power’

Social Credit and money

The current world of economics is in crisis. The crisis is man made.

By Christopher M. Quigley B.Sc., M.M.I.I., M.A.

There is a fatal flaw in the money system. The British engineer Major Clifford Douglas understood this flaw and brilliantly expounded a solution: he called it SOCIAL CREDIT.

The only way this solution can be implemented is if each and every one of us takes personal responsibility to understand what social credit is all about and spread the word.

This slim book is compiled of a number essays that I have written explaining Social Credit in language everybody can understand. Once you experience the “epiphany” of Social Credit and the scales of contemporary deception fall from your eyes your life will never be the same. I invite you to this epiphany.I have also included three other essays by E.C. Riegel, Silvio Gesell and E. F. Schumacher as their theories will help to expand your conception of money and economics.Ideas have no value without action. If the message of Major Douglass does get through to your consciousness please talk to other people about this most important topic and make a difference because what you think, what you say and what you do, matters. To quote the Social Credit author, M Gordon-Cumming

“I trust, however, that you will find it worth your while to master the not very difficult outlines of the present financial system. You will then discover why your standard of living is tending to decline, or at any rate to fall behind the ever increasing productive power of industry. You will also learn why yourself, your sons and your daughters will almost certainly be involved in another world war. (This book was written in 1935.) The understanding of this point (concerning the meaning of money) can be shown to be of vast importance. Indeed it is not an exaggeration to say that the future of civilisation depends upon a rapid realisation of the true facts of the case.”

Chapter 2.

Henry Ford and Social Credit.

Our world lurches from financial crisis to financial crisis yet very few academics, reporters or commentators point out the fatal flaw in current orthodox economic theory which is the central force behind these crises. The flaw relates to the general LACK OF PURCHASING POWER in contemporary society. As was explained by Major Clifford Douglas in his theory of Social Credit this weakness in classical economic theory is not new and many scholars have explained the problem however, increasingly the solution is being conditioned out of people’s consciousness. The collapse of the international banking system, as a result of the banking crisis has brought this Achilles heel of Keynesian economics into sharp focus. The elite fear that the prospect of a “greater depression” will force change that will eliminate their position of control and privilege. Hence the current “spin” emanating from controlled media outlets.What is the main objective of Social Credit? In essence it seeks to fairly compensate citizens with real purchasing power and thus end the current “trans-national/robot out-sourcing” industrial policy of American and European business leaders. It seeks to replace capital investment with human investment. Why? Because robots though they do the work have no money.

They do not buy cars, raise families, and care for the well being of elderly parents. Robots do not use shampoo, eat food or watch base ball. They do not babysit grand-children or change diapers. They do not munch a candy bar or scoff a pizza. Therefore if robots end up doing all the work who has the money to consume the products they produce? Americans and Europeans must stop looking on their nations simply as mechanical economies and start to see them in simple human terms. Irish citizens must wake up and smell the conceptual corruption in contemporary European Union economic policy.

Why is purchasing power so important? It is fundamental because without money no exchange can take place. In order to understand what I am talking about let us look at the historical example set by Henry Ford in 1920. He completely redefined “classical” economics through the policies undertaken by the Ford Motor Company.

Under “normal” economic theory it was assumed that a corporation could only maximise profits by ideally becoming a monopoly which meant increasing price and limiting supply. Ford did the exact opposite. He had a more holistic view of the role of the corporation in society. He understood the synergetic relationship between money and goods. He DOUBLED the wages of his workers, DECREASED the price of the Model T and in the process remade the Ford Motor Corporation and remade America. (This policy was not inflationary because he knew he could at least double production through increased efficiencies when he doubled wages. This is the essence of the enlightened policy of Social Credit for communities rather than of monopoly credit for social elites alone).

The Ford Company boomed. How did this happen? It was axiomatic. He understood the importance of money and purchasing power in society. With “high” wages Ford’s workers were able to make a good living and have excess funds to save or spend. Accordingly their financial anxiety ceased and staff turnover dropped by a multiple of five in one year. This dramatically decreased management expense and increased productivity. Workers finally had peace of mind. With the increased disposable income in the Detroit area the general economy boomed. All classes of economic sectors expanded. As a result more workers, new business owners, company managers, insurance brokers, real estate brokers, bankers, salesmen, craftsmen, delivery men, builders, farmers and retailers all could afford Ford cars. Demand for the model T exploded through the increased buying power WHICH HE HAD CREATED THROUGH MONEY DISTRIBUTION………………

Like Major Clifford Douglas Ford understood economics and he understood the issue of PURCHASING POWER. FOR HIM PURCHASING POWER WAS NOT CREDIT BUT CASH. HE REASLIZED THAT WITHOUT THE MONEY TO PURCHASE HIS CARS POTENTIAL DEMAND WAS IRRELEVANT. THEREFORE HE INITIALLY REDISTRIBUTED DIVIDENDS FROM THE OWNERS TO THE WORKERS. THIS INCREASED GENERAL BUSINESS ACTIVITY AND TURNOVER EXPONENTIALLY. THESE INCREASED SALE BOOSTED PROFITS TO SUCH A DEGREE THAT THE SAME OWNERS EVENTUALLY RECEIVED INCREASED SUSTAINABLE DIVIDENDS. EVERYBODY WON. THIS BRILLIANT POLICY MADE THE COMPANY.

It built up the economy of Detroit and it helped define America as a country where a factory worker was respected and well paid, not exploited, as had been the case throughout the English industrial revolution. The “American Dream” was Ford’s vision made manifest. It was a dream brought to fruition not through political fantasy but through the hard laws of economics, accounting, finance, production, distribution and marketing. As Ford said in his “Life and Work”:…………

full article  in PDF Doc here: Kindle Booklet Social Credit and Money

 

“Robots Don’t Buy Cars”

 By Christopher M. Quigley B.Sc., M.M.I.I., M.A.

Our world lurches from financial crisis to financial crisis yet very few academics, reporters or commentators point out the fatal flaw in current orthodox economic theory which is the central force behind these crises. The flaw relates to the general LACK OF PURCHASING POWER in contemporary society. This weakness in classical economic theory is not new and many scholars have explained the problem however, increasingly, the issue is being conditioned out of people’s consciousness. The collapse of the international banking system, as a result of the Sub-Prime; “Originate to Distribute” catastrophe, has brought this Achilles heel of Keynesian economics into sharp focus. The elite fear that the prospect of a “greater depression” is forcing change that will eliminate their position of control and privilege. Hence the current “spin” emanating from controlled media outlets. The growth of the “tea party movement” is a case in point. Should this political revolution gain in power the possibility of real change in US economic policy will become increasingly probable thus the perceived need to crush it or at the very least gain ownership and control over it. The end objective of this grass root movement should be the dismantling of FED interest bearing credit policy in favour of treasury cash, the abolition of the “open door” Chinese trade policy  and the redistribution of true purchasing power to the average American citizen for the following reasons:

 

                A.            The current American national debt stands at 14 trillion dollars and change. Average rate of interest on this debt is 2-3% per annum. Thus if constitutionally allowed zero coupon treasuries were used to systematically replace this debt, over say a decade, approximately 280-420 billion dollars per year would be saved for the American tax payer by the year 2021.

 

                B.            China is a tyrannical state. For example every year over 40 million forced abortions are carried out on women due to this state’s repressive “one child per family policy”.

 

                Over the last decade approximately 200,000 American jobs, per annum, have been out-sourced to this tyranny.

 

                Morals matter. This “favoured nation” policy must be reversed because a communist state that pays an average wage of 50 cents per hour to “national” teams of forced labour should not be allowed to compete on a level playing field with a free democracy. Such mis-guided policy is effectively destroying the productive base of America. Obtaining cheap goods through Wall-Mart for an economy is one thing. National self-destruction is another.

 

                 Congress must act and remove this “most favoured nation” status. The successful implementation of the fiscal policy mentioned in note A. above would negate any retaliation that the Chinese elite could muster should they threaten to cease purchasing America bonds, thus collapsing the American dollar.

 

                C.            Without general purchasing power effective demand is neutered. This basic fundamental economic fact is not being addressed by current American fiscal policy. The substitute  policy we mean is not based on a Zimbabwe type action where money is simply released to an economy in an ad hoc manner resulting in rampant inflation. No what we are talking about is a well documented and comprehensively researched theory that binds  real productive resources in a developed economy with an effectively distributed money supply so that the total capability of that economy is fully realised for the benefit of all the community.

 

                 Quantitative Easing does not do this. It does not reach down to the average American where it would stimulate real demand. This existing QE policy is being used to bail out insolvent institutions but it is nor filtering down to “main street” where it would really give “bang for the buck”. To achieve this QE funds could be spent on American schools, freeways, bridges, jobs training, port re-construction, light-rail systems construction, broadband communications roll-out, youth skills training and research & development.

 

Fairly remunerated American citizens with real purchasing power need to replace mechanical robots. Capital investment needs to be replaced by human investment. Robots do not buy cars, raise families, and care for the well being of elderly parents. Robots do not use shampoo, eat fast food or watch base ball. They do not watch TV nor change diapers. They do not munch a mars bar nor scoff a pizza slice. Americans must stop looking on their nation simply as a mechanical economy and start to see it in human societal terms. Americans must wake up and smell the coffee.

 

Why is purchasing power so important? It is fundamental because without money no exchange can take place. In order to understand what I am talking about let us look at the historical example set by Henry Ford. He completely redefined “classical” economics through the policies undertaken by the Ford Motor Company in the 1920’s. Under “normal” theory it was assumed that a corporation could only maximise profits by increasing price and limiting supply. Ford did the exact opposite because he had a more holistic view of the role of the corporation in society. He understood the synergetic relationship between money and goods. He doubled the wages of his workers, decreased the price of the Model T and in the process remade the Ford Motor Corporation. (This policy was not inflationary because he knew he could at least double production through increased efficiencies when he doubled wages. This is the essence of the enlightened policy of credit for communities rather than for monopoly elites). The company boomed. How did this happen. It was axiomatic for he understood the importance of money and purchasing power in communities. With Ford’s workers able to make a good living, their financial anxiety ceased and staff turnover dropped by a multiple of five in one year. This dramatically decreased management expense and increased productivity. Workers finally had peace of mind. With the increased disposable income in the Detroit area the general economy boomed. All classes of economic sectors expanded. As a result more workers, new business owners, company managers, insurance brokers, real estate brokers, bankers, salesmen, craftsmen, delivery men, builders, farmers and retailers could afford Ford cars. Demand for the model T doubled through the increased buying power WHICH HE HAD CREATED. Accordingly profits at the Ford Motor Company dramatically improved as a result of his innovative policy.

 

Ford understood economics and he understood the issue of PURCHASING POWER. FOR HIM PURCHASING POWER WAS NOT CREDIT BUT CASH.  HE REASLIZED THAT WITHOUT THE MONEY TO PURCHASE HIS CARS POTENTIAL DEMAND WAS IRRELEVANT. THEREFORE HE REDISTRIBUTED DIVIDENDS FROM THE OWNERS TO THE WORKERS. THIS BRILLIANT INSIGHT MADE THE FUTURE FOR THE COMPANY. It built up the economy of Detroit and it helped define America as a country where a factory worker was respected and well paid, not exploited, as had been the case throughout the English industrial revolution. The American dream was Ford’s vision made manifest. It was a dream brought to fruition not through political fantasy but through the laws of accounting, finance, production and marketing. As Ford said:

 

                “Power and machinery, money and goods, are useful only as they set us

                free to live. They are but means to an end. For instance, I do not

                consider the machines which bear my name simply as machines. If that was

                all there was to it I would do something else. I take them as concrete

                evidence of the working out of a theory of business, which I hope is

                something more than a theory of business—a theory that looks toward

                making this world a better place in which to live. The fact that the

                commercial success of the Ford Motor Company has been most unusual is

                important only because it serves to demonstrate, in a way which no one

                can fail to understand, that the theory to date is right. Considered

                solely in this light I can criticize the prevailing system of industry

                and the organization of money and society from the standpoint of one who

                has not been beaten by them. As things are now organized, I could, were

                I thinking only selfishly, ask for no change. If I merely want money the

                present system is all right; it gives money in plenty to me. But I am

                thinking of service. The present system does not permit of the best

                service because it encourages every kind of waste—it keeps many men

                from getting the full return from service. And it is going nowhere. It

                is all a matter of better planning and adjustment.”

 

Henry Ford

“My Life and Work”

 

Compare for one moment the circumstances in Detroit in the 1920’s and mainstream America today. The exact opposite is occurring. Meaningful wage levels are being destroyed and thus the required American buying power is contracting  due to systematic out-sourcing of real jobs and the mis-use of capital investment to destroy human action. This system cannot hold. Society is being hollowed out from the inside. Folk do not fully understand the total implications of what is happening due to “dumbed down” educational policies. To replace falling money (wage) levels to facilitate exchange between goods produced for consumption and potential purchasers the banking elites have tried to substitute credit availability. This credit switch to compensate for real wages is an unstable arrangement because debt is very expensive and is non-liquidating other than through bankruptcy or lotto wins or death. This is no way to run nations. It creates constant anxiety and eventual destitution and depression among citizens and society. It is particularly ineffective now that most banks are actually insolvent and are no longer in the position to provide credit in the form of business loans, credit card facilities, car loans, overdrafts or home equity draw-downs.

 

Thus in essence the “solution” to “the problem” in America and for that matter in Europe, is enlightened redistribution of purchasing power other than through increasingly non existent credit. Currently too much power over such redistribution is controlled by banks and associate entities. This money centralization is stagnating the system and the fact that this arrangement failed to regulate itself, and caused a credit collapse, has accentuated the speed of failure by multiples. It is time to change. Society must move on. The intellectual framework to effect this change, as demonstrated by Ford, has been known for over 80 years. Its successful implementation today would bring a renaissance to American commerce and societal development. There is no more important function for Academia today other than to disseminate this vital economic truth.

 

Armed with this knowledge for how long do we allow the folly of present economic “orthodoxy” to continue? To me this situation is akin to an adult perceiving the behaviour of wild and immature teenagers, wondering when the “penny will drop” and wisdom will prevail. To the elites, who must know the truth, this monopoly credit based boom-bust phenomenon is obviously allowed to continue because they have control. Their ownership
motivates them to disregard consequences provided they are protected through privilege.

 

However, I believe that the truth is too obvious to ignore anymore.  The end result of the current regressive financial policies is the on-going development of a new modality which I call: “Techno-Feudalism”. This “Techno-Feudalism” is bringing with it vast disparities in wealth, ownership and opportunity. It will lead to the eventual obliteration of the middle classes in developed nations. It will allow global corporations engineer the slow Fabian demise of effective democratic institutions as increasingly corporate boardrooms rather than governments will define people’s destinies.  Untamed it will break traditional social cohesion and lead to mass unrest, criminality and despair. Is this not exactly what we are witnessing in Portugal, Spain, Ireland and Greece? But the future does not have to be so bleak. The monetary solution of increasing actual purchasing power for average Americans and European is so obvious it is “madness” not to sort it out. The truth must be allowed to break free.

 

“The organism has a right in natural law to draw sustenance from its environment. We cannot with impunity abstract humanity from the natural world. ….

 

Unfortunately, the present financial system creates an ever greater deficiency of effective and unattached purchasing power giving the illusion, through a distorted financial lens, of actual or physical scarcity in the midst of actual and potential abundance…..

 

We are trying to pass from one type of civilization into another in which the possibilities are such that we cannot begin to imagine. That transition, I believe, will best be facilitated in an environment which provides maximum freedom (immanent sovereignty) for the individual in the context of absolute economic security.”

Wallace Klinck

 

In the 1930’s the engineer and self-taught economist Major Clifford Douglas claimed that society was intellectually hypnotized and that only a drastic de-hypnotization and re-education could save it. Douglas believed in people. He felt that individuals had far more goodness and potential than society was allowing them for. He reckoned that if common folk were given enough freedom and leadership they could move society and civilization into a new golden age. An age of extended liberty, discovery, art and culture.  The alternative he felt would be booms, busts, over-consumption, under-consumption, excesses, depressions and wars. Eighty years later this is exactly what the world has experienced and is continuing to experience. However, the period between each stage is narrowing and the level of debt, instability and inequality are exploding beyond comprehension. To followers of Douglas this situation is not happening by accident; it is happening inevitably because the conceptual flaws of the monopoly of credit and the fabricated scarcity of money was allowed to be perpetuated by a privileged banking class.

 

The monetary and economic policies of such people as Henry Ford, Clifford Douglas, E.C. Riegel and E. F. Schumpeter et al are heartfelt attempts to bring about “steady state” change to historical economic orthodoxy. It is incumbent on all interested parties who desire to solve this problem of problems to become educated and aware of the available solutions and to actively participate. Not to do so will allow the current “greater depression” to expand and gain a greater grip on economic activity. History shows that such a development will eventually lead to escalating strife as sure as night follows day. For us who wish to reject regression in favour of progress we must strive to free contemporary economic policy from its death waltz with outmoded Keynesian monetarism.  We must help economic orthodoxy must move on, sanity demands it. The knowledge is there let’s utilise it.

 

 

References:

“Flight from Inflation”

E.C.Riegel

The Heather Foundation,

Los Angeles.

 

“My Life and Work”

Henry Ford

In Collaboration with

Samuel Crowther

 

“Small Is Beautiful”

E. F. Schumacher

 

“Social Credit”

Major Clifford Hugh Douglas

Mondo Politico.Com

 

Wally Klinch

Social Credit Archivist

 

(c) 2012 Christopher M. Quigley

http://www.wealthbuilder.ie

 

Valun mutual money plan

                              Valun mutal money plan as conceived by E.C.Riegel

Christopher
M. Quigley

B.Sc.,
M.M.I.I., M.A.

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:

Provide a stable price level.

End the debt-money system. Credit would be extended solely upon the ability to
deliver goods and services.

Abolish interest within the system.

Take the money-creating power out of the hands of government and banks and
place it in the hands of private enterprisers.

Make government
operate on a cash basis; prevent deferred and delusive taxes through inflation.

Assure distribution of goods by distributing money power.

Prevent inflation and deflation; boom and depression

Defeat bureaucracy, fascism, and communism by taking the money power from
government.

Defeat hidden money control from any quarter.

Assure full employment and a high standard of living. Give the people the veto
power over war and government extravagances.

Supply the perfecting element in democracy and private enterprise.

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

 

 

Monetary Theory of E.C. Riegel

By Christopher
M. Quigley B.Sc., M.M.I.I., M.A.

 Introduction

In a life spanning over 70 years, one of the greatest students of money, and its meaning, was the American E.C. Riegel. Many regarded him as a genius for his understanding of the nature and functioning of money as a human and social institution. This essay is a direct introduction to his main ideas on this subject, as, increasingly, people are beginning to realise the need for a more stable monetary unit. In essence, in his book “Flight From
Inflation” he identified money as the mathematics of value and argued,
that for a democracy to thrive, he believed the “money power” must be
free. He basically viewed any political economic monetary system as socialist.
For this reason he was at odds with Adam Smith‘s view of the World. Indeed, he
felt that Smith in his “Wealth Of Nations” pre-empted Marx as a
social theorist. Regardless of his views, Riegel has come to be respected for
his unswerving belief in mankind and his heroic efforts to champion practical
freedom based on the realities of exchange systems, which are based on value.

The freedom of exchange is the foundation of all freedoms, and the freedom of exchange unencumbered is the truest democratic freedom of mankind. Civilization began with exchange, and exchange began with whole barter i.e. things traded for things. The first improvement on whole barter was indirect barter. This was the practice of utilizing commodities of common use as reserves to be later traded for items of immediate need.

The adoption of precious metals, such as gold and silver, developed this trend. This step reflected a growing emphasis upon facility in exchange. Accordingly, through the passage of time, a new means of completing transactions arose through the practice of depositing precious metals with goldsmiths, who in turn issued warehouse receipts. Such pieces of
paper became negotiable through custom, and so purchases could be effected by
their transfer.

Acceptance of negotiable gold receipts, i.e. promises
of future delivery, marked the first real step toward the utilization of money.
It was at this point that barter was finally fully split into two halves, WITH
THE BUYER RECEIVING VALUE AND THE SELLER RECEIVING ONLY A CLAIM. This was the first faint glimpse of the tremendous liberating power of money. We can also
see that the ideal of money is to split barter absolutely in half, without any
limitations imposed upon the seller. Hence, we realise that money is a device
that operates within the trading community, for that community’s own
self-interest. The necessity of splitting barter into halves in order to
motivate trade is the motivating force: sellers want to sell and buyers want to
buy with the least amount of inconvenience.

IN A COMMUNITY MONEY IS ISSUED BY A BUYER. Such a
money issuer, must, in exchange for the goods and services he buys from the
market, place other goods or services into the market. Thus money as a money
instrument is evidence of a purchase that is issued by a purchaser to the
seller. Therefore, money is actually backed by the value surrendered by the
seller and potentially backed by a value in the possession of the next seller.
To
print bills and mint coins is not to issue or create money. This has no more
monetary significance than if you were to write a cheque and leave it in your
chequebook. Instruments that have not been put into exchange are non-existent
in the World of exchange and money. Money simply does not exist until it has
been successfully accepted in exchange. In theory, two factors are necessary
for money creation. A buyer who issues it, and a seller who accepts it. Since
the seller expects in turn to reissue the money to some other seller, it
will be acknowledged that money springs from mutual interest and co-operation among traders and not from authority.

It is a fallacy to think that a government can issue money. Money can be issued only by a buyer for himself, and he must in turn be a competitive seller to recapture it and thus complete the cycle. This competitive co-operation for goods and services creating value in the market is actually what makes money work. This competitive situation, in which the trader redeems his original monetary issue, through the sale of his own goods and services, assumes that the community’s money will maintain its stability. All enigma as to what causes money to circulate and maintain its power is thus
dissolved by comprehending this natural law of money issue. THIS LAW STATES
THAT THE LEGITIMATE ISSUE OF MONEY IS CONFINED TO PERSONAL ENTERPRISERS IN THE MARKET PLACE, SINCE, THEY ALONE, BY THE LOGIC OF THEIR SITUATION, ARE ABLE ISSUERS OF VALUE. Thus, in essence: money is issued by a purchaser, but it must be issued by a purchaser who can, and is, prepared to issue value; it is a tradesman’s agreement to carry on split barter among themselves.We see that money is the mathematics of value
exchanged based on mutual agreement. The monetary instrument is but the
evidence of the consummated trade. It is a mistake to attribute purchasing
power to the instrument, for it has none. It is merely the conduit through
which purchasing power flows; such purchasing power lying in the commodities or
values exchanged. From this analysis we can deduce that commercial banks do not
“lend” money. They, in fact, permit the “borrower” to issue money. Once given permission, the borrower now has the legal authorization to write cheques to the extent of the loan and tender them in trade. UPON THEIR ACCEPTANCE BY A SELLER, WHO IN FACT PROVIDES VALUE, new money has come into existence. This money remains in circulation until such time as the borrower, through becoming a seller, recaptures money with which to liquidate the loan.From the premise of the natural law of money issue, it
must be accepted, that governments cannot qualify as issuers because they are
not in the real situation of personal enterprisers. They cannot qualify, as
they do not barter. They do not bid for money in the market place. Their taxing
power relieves them entirely from selling. They take by taxing. When they are
admitted to the issue power, their issue cannot be a genuine promise to
deliver value in trade.
It must, of necessity, be counterfeit, regardless
of any statutory laws intended to validate it. From this failure to discriminate between money issued through bank credit by personal enterprisers and by governments, has come an inflationary mixture of true and false money that will eventually threaten social order. Money cannot be issued in perpetuity by man-made laws; it operates by its own natural law. To ignore this law invites uncontrolled inflation.

The destructive force of inflation is not confined to its covert taxing power. This is only its early manifestation. Its later destructiveness lies in its power to amend, and finall, to nullify the contractual relationship upon which the social order depends. The whole
philosophy of freedom is encompassed in the single phrase; POWER TO
CONTRACT.
While a small distortion of the unit of account impairs contracts
previously written, a consistent inflation actually destroys all existing contracts and prevents the making of new ones.

Adam Smith in his political economy allocated the money power to the state, thus he ante-ceded Marx as a socialist. It is his followers, unconscious socialists, and not those of Marx, who constitute the greatest peril to the order of free exchange. The Smith philosophy is taught in all the schools and colleges. Students become indoctrinated by this ideology
unaware that in its monetary concept it is contrary to the true philosophy of
personal enterprise and individuality. An unnatural monetary system begets
unnatural economic manifestations. How can a free economy work with the monetary system socialised? Rampant inflation makes a mockery of any true accounting for any true contract. When the future businessman discovers that his pride in cash was a delusion and a snare; that his cash reserves, which he meant to freeze have melted and evaporated; that
his balances might have been preserved if they had been cast into materials;
that his bonds and money claims on others have shrunken and that he might have
profited had he known enough to get into debt; that his tax refunds are far
less in power than those paid in; that he must pay capital gain taxes on what
are actually losses; then that businessman will realise that the whole
contemporary inflationary accounting picture is a delusion.

If money is issued under the natural law of issue, unit stability will be in evidence. Under natural law, if exchange plays no tricks on us, we are all really working for ourselves. We will all be interested in stability. In reality we are all buying for ourselves; we are all
selling for ourselves. But just exactly what is it we are buying and selling?
In the final analysis, it is simply human energy, mental and physical. Labour
is the basic, or virgin, commodity. It has no quality of obsolescence, for it
is always associated with the latest, and therefore, the timeliest products. IT
IS THE ONLY VALUE
. Others have comprehended this, from the premise that all
value is labour and since money is based on value, they have reached the
correct conclusion that money must be, in actual fact, labour. However, the
fatal error that labour money planners have made is that they set a measure of
labour, such as an hour, as a unit of value. While it is true that labour, both
physical and mental is the only value, and therefore, the sole commodity that
passes through exchange, IT DOES NOT FOLLOW THAT ALL LABOUR IS OF EQUAL VALUE.
Labour may be so unintelligently applied that it is completely worthless. We
are all labourers, and therefore, fountains of wealth because we all emit human
energy. We must, however, direct that energy to meet the demands of our fellow
labourers. By the measure to which we successfully respond to this demand will
our energy be valued. Money is not a measure of value, it is a method of
stating a value that has already been determined through exchange.

If money is ultimately the mathematics of value set by exchange, what is value? VALUE IS THE RELATIONSHIP OF DESIRE. It is arrived at in the mind by comparing one thing with another. Thus what actually takes place in trading is the determination of values and this mental process is the act of “moneyizing”. It is a mathematical process. As the act of”moneyizing” is psychological, so the act of”monetizing” is material. It should also be noted that both arise out of and do not ante-cede, exchange. Trade produces money; money cannot produce or induce trade.

TRADE, LIKE MONEY, IS A SOCIAL PHENOMENON BASED ON MUTUAL
CO-OPERATION AND INTEREST.

In conclusion, value, mathematically compared, is money. The purpose of the medium is to achieve split barter and to allow the monetary unit of exchange to be universally accepted for any good or service. The discovery of the power of money as a social mechanism has freed mankind and has been immensely influential in the development of society and civilization. Its importance cannot be over emphasised. However since 1909 the influence of government policy, both national and international, has steadily brought about monetary debasement. Should the level of inflation currently in place be
allowed to continue, sound money will be driven out by bad “fiat”  legal tender. This problem will only be resolved when our leaders come to terms with the realisation that there is a natural law governing the issuance of media of exchange, and if this law continues to be broken by socialist ideology, the very bedrock of the western tradition of freedom and individuality will be broken.

Source:

Flight From Inflation

The Monetary Alternative

E.C. Riegel

Edited By

Spencer Heath MacCallum & George Morton

The Heather Foundation

Los Angeles, California.

www.reinventingmoney.com

 

 

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