Thursday, May 9, 2013

#29 Starting At The Beginning

It is clear that people would like to use money without bothering to think about anything more than how to earn it and how to spend it. Additionally most people would rather purchase things in cash than having to borrow money or use credit, knowing that thereby they receive a lower price; therefore most people would like to be secure in knowing that the money they use is worth saving for those larger purchases. People the world over are frustrated by the same things which are traceable to problems within the present system; they are concerned chiefly with matters of price stability; inflation and deflation of prices, usually for common household products, food and energy, but also for other tangibles like the prices for homes, cars, computers, etc. They are also concerned with earning enough to support their lives, not just now, but on into the future.

We could spend more time evaluating all that is wrong with the present system. In any case, we believe that it is doomed due to its fundamental mathematical flaws and therefore cannot be saved. Compromise is irrelevant: like the Titanic, it is going down [and we are not about to be fooled by the fools gold of the recent stock market surge, the DOW over 15,000 for the first time ever, proving the incredible inflation in their share prices, selling at P/E's well over 15.] and like it or not, the best thing for everyone to do is get lifeboats together and get into them and move away from the present system as quickly as possible, so as not to get sucked into the whirlpool of chaos as the system goes down.

The proposed Value Exchange Network (VEN) does not envision the need to be more complex and difficult to understand than the present system. It was said, “build it and they will come.” In that spirit, we embark on a description of a VEN starting from the basic local organization, and a few basic concepts.

The Lifeboats

An VEN is a network made up of nodes, each called Independent Exchanges and identified by such terms as The People of this or that identified area. Each IE is established by a group of individual human beings and businesses in a local area, commonly a town, county or unincorporated area. There might even be several IE's in an area if it is big enough to support them. Each IE is supported by transaction fees which are standardized and predictable. We expect that some will be making a modest living from maintaining a local IE, however the notion that these “exchange officers” should be compensated anywhere near that expected by those operating in the present financial system will disappear. In fact none of them should be able to earn anything more than those who actually work to create products and services or grow things people want to buy. Typically a transaction fee should be no more than as E. C. Riegel suggested; one tenth of one percent of the transaction.


Every IE is strictly speaking a private association in that they are owned and run by and for the people they serve and all members who are eligible, decide to join of their own free will. No one other than they decide whether to join or not. If they don't like what they experience they are free to leave at any time. This is the summation of the freedom to contract; membership in an IE is a private matter and is engaged in of mutual consent. Of course there will be rules and processes for joining and severing membership in an IE, just as there are for any other private organization or association.

Members are individual human beings and businesses. Governments are, for the time being, disallowed as they are not private. Corporations as Limited Liability entities, are also excluded for the same reasons. Only individual human beings and Unlimited Liability businesses are allowed, because they are private. Public organizations and corporations are disallowed because they are public and therefore subject to the nuisances of public law.

Within certain general guidelines, each IE will determine the criteria for its members, but the usual sense shall be that those who are resident in a given local area and have been residing there for a good length of time according to local custom, would be acceptable. This has many ramifications for the future, including deciding who would be considered a lawful member of any IE; those who cannot prove their legal residency status would be advised to return to a country where their IE membership would be recognized without any possible dispute; foreign people who were illegally residing in places would have to return home to join their own IE's.

Individual human beings can join as A members, businesses join as B members. An A member operating in an IE other than his/her own is a B member to those IE's. Only A members are allowed to create money as an inalienable right, through overdraft accounts as will be explained. B members may acquire the shared credit of A members that are employed by B members. Where in most instances, an IE serves a locality, membership status is affected by locality as previously noted. Trade can obviously traverse localities, but those outside a locality are B members to it, while being A members in their own locality.

E. C. Riegel developed a shared credit concept that allowed those who needed Value Units to have them, while recognizing that those with assets would need to be able to trade their way into an VEN, exchanging their currencies for Value Units, eventually trading their property for Value Units. Of course Riegel called his monetary unit a Valun, short for value unit. We cannot at this time honour the man's ideas by naming the value unit a Riegel due to a potential for copyright infringement, so herein and throughout this blog, the independent monetary instrument; money, is called a Value Unit. [Right now, that might make things easier as every reference to Riegel is to the man, not his monetary unit.]

In previous essays we have made it clear that we intend to offer a Value Unit as a universal measuring stick of value that will not move; that is, even though it is initialized using a reference to an ounce of gold and its relation in price to dollars, from then on the Value Unit would have no direct influence from the price of an ounce of gold, it would never be pegged in any way to anything else. Within the market generated by the presence of new money, prices will seek their own level until their equilibrium is achieved. The Value Unit will retain its value and hence be immune from inflation.

For those who would buy into an IE, Riegel envisioned the need for a sinking fund made up of dollars. Unfortunately no IE, being private, can be in a position to hold dollars (public money) or any other public currency (which really belongs to other private entities anyway as “bad notes” based on unpayable debt). Any attachment one has to their money indicates the degree one is subject to going down with the Titanic.

Instead, the IE will only take gold and silver bullion in trade for its Value Units based on a formula that considers the trading price of these standard metals and a price for a Value Unit based on the price of gold on a specific date and at a specific price. [This was set as an experiment on 2 November, 2011, note the date for ease of recall. To date, Value Units have risen 15% over their initial value in dollars, without any of the phony scarcity inducing algorithms of bit-coin. Again, scarcity is for us an irrelevant qualification for anything used as money.  Please see here, for the latest comparisons.]

If one is buying an ounce of gold bullion, one will pay whatever the price is in dollars or their own currency and it will change from day to day, because the bullion brokers in London and elsewhere are manipulating the prices of these metals. They don't make any money when the price stays the same, only when it goes up or down as they make it do every business day. We do not want to be under their control, so we decide that a Value Unit is to be based on one thousandth of an ounce of gold ON A SPECIFIC DATE AT A SPECIFIC PRICE. If one is trading Value Units for gold, the price will tend to hover right around V1,000 = 1 ounce of gold. (As of 30 July 2012 an oz. of gold bullion buys only V939.93 and 1 oz of silver bullion would trade for V16.35).

Once one is trading completely inside the VEN, all prices for commodities and services, anything, will tend to be determined by supply and demand and the costs of production established within the market created by Value Units, regardless of the prices for these things in currencies.

The only purpose for gold (and silver) in the system is to use as an exchange fence to preserve purchasing power within the VEN and limit incursion by the old financial system and its currencies, NOT to tell people that Value Units are “backed” by gold, which would be falling back into the old fallacy that money requires any value other than what it buys to back it. Once you're only trading in Value Units, the old system can just go away.

(I'll further note that as of 30 July 2012, the manipulators who have caused the prices of gold and silver to fall, or attempt to stabilize, so they can attract and fool more gullible and greedy people into their paper market, in terms of our hypothetical standard, would have been losing value from inception. Put another way, at inception one could have bought a Value Unit, had one existed, indirectly with dollars for $2.16 which has now become $2.29 and has been as much as $2.39 and will tend in that direction as gold falls in price, which it may do.)

Meanwhile within the VEN, it is hypothetically assumed, based on the foregoing, that while at inception one would have had an ounce of gold bullion for a thousand Value Units, one might very well get one for V950 or less as of this date. There must be some “price relativity” as Riegel called it, but in the scheme of a stable Value Unit based monetary system, the differences would likely be less easy to manipulate than outside it, so anything an IE community really wanted they would be able to buy from any other IE community and after a while prices would be stable, and higher in terms of value exchanged, and therefore everything, including gold and silver would tend to be held by those who trade exclusively in Value Units.

Likewise, no IE needs or wants “public” memberships, because most of these have nothing anyone wants to buy; they are illegitimate as businesses and are certainly not human beings entitled to create their own money. That a few of them have given to themselves, through whatever means, the power to create money, is beside the point. Since their money creation is illegitimate (it is not backed by product or labour freely offered in a free market) and represents a false claim on the resources, services, products and properties of others, their presumption amounts to both fraud and theft of what does not belong to them. If you belong to such an organization, we might suggest that you consider who you are working for and for what and decide to leave, walk out and away and do something else. What else? Anything practical that people will want to buy from you, the produce of your own personal and private talents and labour.

No IE will be allowed to offer membership to an organization that is not private, therefore all government registered non-profit organizations, limited liability corporations, and governments are disallowed.

What then, some will say, of artists and arts institutions? It is quite easy to recognize an individual artist, A member, or arts institution as a B member within a particular locality and may be even easier to finance since A members that work for B members are in a position to finance their employment, a particular concept that seems to have been eluded to by E, C, Riegel, but his may have derived from some precursor ideas.

It is also easy to envision how these arrangements may effect all the professions eventually.

It is time to offer some ground rules for those who would organize an IE and a VEN.

1. We see a viable VEN as consisting of a minimum of three (3) distinct geographical areas (which may be contiguous), each area supporting a population of between 40 and 50 thousand people.

2. We see a viable IE consisting of a minimum of five thousand (5,000) members, at least 100 of which are businesses.

3. Those who would most benefit the cause of establishing a local IE or a future worldwide VEN would be those who are seemingly least in need of one at the present time; those who already have sufficient means and resources to enable them to devote as much free time as they can to the effort. At this time, we are not soliciting those without a means of existence as at the moment we have nothing with which to pay you. Those with a means of existence qualify to help us, these are the real John Galts, who would volunteer to work together locally to make a network of fully functioning Independent Exchanges possible.

Our message has resolutely remained “come out of her, my people” and it was really Ayn Rand's message as well. Who better than the real John Galts, to volunteer to put something together, to free exchange from the bondage of “public” organizations as well as saving their own fortunes and themselves into the bargain? Even those on social security may qualify as they may have plenty of free time to devote to required tasks. We might add that doing things our way eventually brings an end to poverty and war worldwide. It would of course, reveal for all the world to see, the blood soaked monsters, the “savage babies” who have so long held sway and kept the human race in bondage for many hundreds of years, but in their latest version, since 1815.

We look forward to collaborating with any and all who can demonstrate proper acumen for the work of mounting ad campaigns, providing education and gaining members in their local areas. Correspondence and coordination for this effort will be through and of course you are all welcome to follow this blog as now the pace will be picking up.

David Burton

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