Monday, May 13, 2013

#31 Some Characteristics of the VEN

The Value Exchange Network (VEN) is the proposed association of Independent Exchange nodes (IE's), each representing a distinct population of at least 40,000 people residing in a specific geographical area.

Each IE would require a critical mass of members; out of population of 40,000 people in a particular area, an A membership of 5,000 with at least 100 B memberships being viable businesses. Those are minimum requirements for a well functioning IE.

We would expect that IE members would have a number of things in common; they may be on limited incomes, retired or semi-retired; they may be veterans, they may be disabled or living on disability payments; they may be struggling independent businesses or professionals, which could be sole proprietors or simple partnerships; they may be private farmers or foresters. They may be specialized shops with specialized equipment or perhaps small manufacturers. They may be private retail stores of all kinds, especially those selling food, clothing and basic supplies.

Then again, it may be just as possible that those farther up the ladder of wealth and success would have a serious interest in an alternative to the present public monetary system. They may be John Galts at the present peak of their powers, but wary of the implications of being tied to the present system, especially for their futures. Many are very concerned about the world their children and grandchildren will inherit.

Another group might be young people with a fierce determination to succeed in a business where few in the public money world would take them seriously. Quite a few successful careers are built by those without a proper education or credentials.

The one thing these people would all have in common is their shared perception of the present economic situation; that the public monetary system (which it really isn't, since all the factors operating as creditors of all the governments are private) cannot be relied upon to provide a credible social or economic future and they are looking at ways, not only to survive, but to thrive.

A characteristic associated with likely IE members would be their realization that there is something wrong with all the present public money out there, even if they don't know exactly what it is or its cause. We'll be calling this “public” money (even though it really isn't), as ours will be essentially and always private. We offer a truly independent money, created and destroyed by those who use it in the process of trade, that can be used as a reliable store of value for those things requiring a longer yardstick with which to measure their value, that being the real purpose behind saving any money, to acquire in future that which costs more than the money one has in the present with which to buy it.

For the time being, think parallel and complementary, but that will change.

Many hard working folks out there have found two or more jobs that they do part time to make ends meet. In the beginning, access to alternative money can be applied to buying certain things locally, while the current “legal tender” currency is used for those things that must be paid in them (Pay unto Caesar the things that are Caesar's). It goes without saying that this would require employers to be willing to pay employees in this other money to supplement what they are paid in public money.

E. C. Riegel described many ideas to get employers to participate, but I noted with every one of them, that they would have entailed employers to do more “in house” accounting work which they would not be willing, or in most cases, even able, to do competently. Therefore it is proposed here that each IE's would do the bulk of the administration tasks associated with this parallel stream of payments in Value Units (or whatever they end up being called, to be determined by the Steering Committee). All processes should as far as possible NOT add additional work to prospective employers. For example, they need not have to write any additional checks to their employees on payday in Value Units. All that Riegel discussed about “valdol checks” etc. is really unworkable, as it places too much added strain on businesses. Perhaps this is why Riegel couldn't get anywhere. One has always to make things like this as simple to use as possible.

Instead of what Riegel proposed, let's look at it this way: a business must be an IE member to participate; they have a B member account in their local IE. They have employees that are A members of the same local IE (In some cases a company might be large enough to operate functions in many different places, so in each IE they would have a B member account).

What the employer and employee have in common (besides VEN membership) is a simple private Labour Contract that stipulates the terms of employment (a possible future paper on this subject will appear here soon) that specifies pay in Value Units and this contract resides in the local IE which takes care of the transactions the contract requires. Since the pay date might be a month after the employee starts work, and employees in this system finance their own pay, the employer gets the Value Units to pay his employees on the first day they work and has the float to use between the first day of work and payday. The A member employee has created the money with which the employer pays him (he has bought himself a job) and the employer gets the float to use in the rest of the VEN until payday. The employer decides how much the job is worth, but whether the Value Units are many or few, the same principles apply.

So on the first day of work, the required Value Units are placed into the employer's B member business account as a transaction from the employee A member account (It doesn't really come from there but will be so accounted for). On payday, the required Value Units are transferred from the employer's B member business account into the A member's account. The employer and employee are each provided with service and didn't have to do anything extra. The same process continues as long as the contract lasts, pay period after pay period, each time the amount of pay is transferred first into the B member's business account and then when paid, the payment is made back into the A member employee's account. This is one of the core operations of each and every IE!

In this way VEN membership provides another stream of income and does so even while the current corrupt system remains in place with very little added overhead for either employee or employer.

While we're on this subject, let's say that the business doesn't have the public money or as much of it to hire someone as they might want for their particular skills or levels of expertise. VEN membership provides additional units of exchange in Value Units in a growing private market that is potentially international in scope.

As can be seen, the VEN promotes different attitudes between people based on the advantages it provides to those engaged in trade particularly in local communities. We wonder what might be loosed upon the labour market by the idea that one can perpetually finance their remunerations. For one thing, as the VEN grows and the true value of Value Units is perceived, employers are going to be willing to pay more for a nice up front bonus in time and purchasing power they get from each of their fellow VEN member employees. It probably works best for those paid on a monthly basis, but it can serve any widely used pay schedule. It wouldn't make much sense to do all this for pay periods lasting only a few days.

Unlike public money, which flows according to the whims, plans, etc. of various far-flung elites, with their nefarious and evil intentions (just look at the back of a dollar bill), Value Units are never in short supply. Likewise, because the core monetary accounting in the VEN is based on mutual credit clearing, there can never be too much money, such as to cause inflation. Value Units are created and destroyed by everyone who participates in the VEN and each has the potential right, should they need it, to create Value Units to buy their subsistence. Credit too, as we have just seen, is a matter open to each individual based on their abilities. As an employer agrees to pay an employee, that employer is granted the float on that employee's pay until each payday. This method also frankly has the advantage of placing labour and talent clearly on the block in terms of desired abilities and what they would likely fetch in each local market for labour.

Value Units are never created based on a loan at interest, so there is never more demanded back with which to repay that which was not created. Without usury, we contend that the extra wealth created in the VEN, recalling that all wealth is that which is capable of producing income, is most likely to build within the local communities that open an IE and participate.

All the money in a VEN is created (and destroyed) by its members and there is never any question who owns the money in each account, therefore all sorts of weird and wonderful arrangements the public money system has devised to eliminate cheating, theft and fraud are not required. The money in each IE account belongs to individual A and B members, and NOT to any IE. Nor is any money in an IE pledged in any financial transactions unknown by the members because no IE can or will ever be involved with loaning money. These finance functions will be handled by businesses operating for themselves outside the IE, but all the terms of their Credit Contracts must be accepted by the officers of each and every IE to apply to strict and simple rules to be developed to prevent the predatory credit practices that infest the public money system.

The VEN may end up becoming as impersonal as dealing with your local bank or post office, and that's in the nature of things, since money after all is merely an appliance used to accomplish other more meaningful things in life. Nevertheless, in particular due to the self-financing of labour feature, we can expect each IE to provide another dimension to the social affairs of each community.

Fully functioning IE's would serve to eliminate the complaint of sellers not being adequately paid for what they supply, either in goods or labour. One might see places where sellers are willing to take a few extra Value Units along with public money in trade for their goods or services. We believe the same is more than true concerning those in need of employment these days as they could do with less public money as long as they are paid extra in our private money; Value Units.

The core of each IE's business is to earn transaction fees for clearing and reconciling the accounts of buyers and sellers as close to immediately as possible; there should never any banker's 3 to 7 business day hangover due to the balancing acts bankers engage in with loans payments against customer accounts.

IE membership promotes honesty, because no A member can ever 'go broke.' If you are poor, nobody is going to despise you because of your limited finances. You will always have some money and anyone within the VEN will certainly sell you something for the money you have. Should you decide to do some business above the Value Units you are “granted” to create (there are maybe better ways to say this) through the mutual credit clearing in each community, it will not adversely affect your “grant” as happens with government public money welfare systems. Part of this is due to the fact that each A member is already eligible to create money for subsistence. We would expect that this new non-apologetic attitude toward poverty would serve to improve honesty among all people and therefore should discourage many common crimes, because any A member can 'create their own money' according to their own personal needs.

The VEN would tend to raise the lowly and increase avenues for upward social and economic mobility, building back middle classes in the developed world and promoting them in the developing world. Its democratically applied functions tend also to level playing fields: every member actually begins in deficit and those who deliver real value to others are the ones who can become wealthy. Our rules would specifically eliminate schemes and games played in the present financial world using public money, specifically those which deliver nothing of value to the market.

As the VEN grows, it will promote any natural business trading value for value over vast distances, but within each IE will tend to favour local suppliers of both labour and goods. Small and medium size local businesses and private family businesses will not only qualify for B membership without difficulty, the VEN will tend to benefit them more than any other forms in that they will gain exposure to many other similar businesses organized across the VEN. Reliable trade between factors of comparable size will build capital locally where it can be put to use to provide that which people really need and want; houses, farms, businesses, cars, trucks, capital goods, etc. Much in quality that is presently lost to transportation and extended storage, due of course also to the typical corporate structure that justifies this way of doing business, will gradually fade away as the production function will tend to be focused locally.

The VEN and each IE within it, rests on ideas derived from E. C. Riegel's works and those of others, and actively intends to change the public attitude that regards the source of money as a job, when the source of money is actually the delivery of value from one human being or business to another human being or business. We also remind everyone that the real wealth of a community, that capable of generating income, consists in the combined knowledge and skills of its people.

This change in attitude fosters self-reliance and self esteem everywhere and to all without some phony indoctrination trying to get people to whimper to their governments for some public money handout with strings, as “victims” of this or that social injustice that the government, somehow in its profound wizardry hasn't seemingly been able to do anything about, but will pay “victims” for accepting as their victimhood.

Real social justice and a reasonable and rational economic equality of opportunity are not all that complicated. The VEN attempts to do some things the government tries to do, but can't do because it's the government and is operating outside its normal functions by doing so, since in order to do what it does for the “welfare” of some of its people, it BUYS what it cannot SELL back into the economy, thereby adding spurious money into the economy, causing inflation. I should add that the various welfare programs are nothing compared with the hundreds of billions of its public money it spends on weapons and worse, none of which any of us would want them to buy (unless perhaps we were in the “defence” industries).

We solve the problem by turning things on their heads and asserting that ONLY those without money are entitled to create it. The VEN will tend to really give the disadvantaged their basics; liberty and property with which to manage and grow their own life.

Many features of the VEN involve the potential for sharing business information among members. This too is another indispensable function of each IE. If you are a member and seek work on any basis doing whatever you can offer, you will be able to post what you have to offer on the private (for members only) bulletin board system that will be developed.

When one wakes up from the current dream / nightmare of the contemporary world situation, one sees things quite differently. A cadre of “savage children,” who might nonetheless be octogenarians, rules the world from behind the scenes, using grants of public money to buy compliance or provide select promotions. At the same time, the appearance of fairness must be preserved at all costs behind a mask of political correctness, which assures some that nobody will ever dare make fun of them. Oh, how ridiculous!

The truth of course remains the ultimate authority and by the light of its glare just about everyone nowadays sees quite clearly the reality of special favours and spoiled special interests who get to romp and play while the corporations that support them can get away with anything for profit because ... they are so special that they get to run their businesses with a limited liability for any harm they do. Isn't that just wonderful? And Rothbard and the Austrians never seriously questioned any of this. The Keynesians? They positively love corporatism.

But it's killing all of us, and yet it is THEY who dare tell us we're to blame! It's long past time to consider “come out of her, my people” and get with something that will have a future, your own future by your own making.

We're going to need to set up a Steering Committee as a logical next step. Those who are minimally qualified are any who have an honest serious interest and are otherwise of independent means to provide some free time, not much, but some. Please contact me at and we'll continue this discussion off line.

David Burton

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