Saturday, November 16, 2013

#20.5 A Preliminary Standard for Value Unit Exchange Notes and Coins

This is a link to #20.4 the previous post in this series.

[2/9/18: This marks a departure from the Exchange Note idea.  Coinage is also out.  Many other matters described in this #20 series are still active.]
This post concerns updates to our proposed standards. Although we can imagine a future time when our Exchange Notes and coins would float around as freely as the “public” money does today, recent conversations have indicated a trend suggesting that E. C. Riegel, after all, merely asked us to pay closer attention to the power of checks against accounts, as money. “Hey, didn't Riegel say, just give everyone a checkbook?”

Since the Value Exchange Network (VEN) can be thought of as a private market, it could be considered as an entity operating both locally and worldwide. The VEN can be thought of as all the transactions operating within a local area covered by an Independent Exchange (IE) affiliated with our International Value Exchange Society (IVES) or the VEN is the total of all of these forming a worldwide network. We started by suggesting that we'd need three IE's to get up and running (with their associated Valun Counters – VC's) in order to affect a workable VEN. We may now say that it may take three IE's operating in any given state (for US) or province (for Canada). There are at present legal boundaries that affect trade between states, etc. We seek the most favourable climates for absolutely non confrontational start ups that may not even function spectacularly at first, but shall slowly and surely prosper a community.

We see in the immediate future, VEN start ups that would be at most statewide (for US states) or province-wide (for Canada, etc.). Some overseas, would see their smaller geographic subdivisions as natural provenances for each independent exchange (IE); perhaps each d√©partement in France would have their own IE, #75 (Paris) might well have at least 20, etc. We wonder if it wouldn't even be possible for there to be some local variances in names, as after all, the idea of an “exchange” rather than a “bank” is the only crucial matter. Each organization would be a local Valun Exchange in fact, would be independent in terms of its ownership, would adhere to a set of ground rules (which is why you need more than three, so they can make sure they're all operating under the same rules) and would represent the people in its geographical district.

What enables the VEN to propagate is the Valun, chosen as a universal international standard of commercial value measurement. It's the same everywhere. We should all know by now just what Riegel meant when he said that what we are doing when measuring something's price, with whatever available money, is comparing items esteemed to be of comparable value. That's how we determine whether to buy something or not and the “backing” for any money is in what it buys. Money only performs the accounting function in any transaction. (We'll have ample opportunity to sift through McFadden's remarks, recently posted, to gain understanding of what people thought 80 years ago, and still think, regarding money.)

Again parenthetically, and we shall return to this matter many times in this blog, Gresham's law* always holds, and to be considered a real law, it must have the reliability of the force of gravity and it certainly does, as history amply demonstrates. Gresham's law is still very much in force today and actually accounts for more business, profits and fortunes than anything else, which we hope to explain in future papers. What Gresham meant was that the cheaper the intrinsic value of whatever it is that's used as money will always drive out of circulation that which is intrinsically more expensive.

Gold bugs” please take notice, Drockton and others, please pay attention. The idealism (at the least wrongheaded, at the most downright evil) of attempting to get hunks of precious metal to ever circulate widely in trade as money is rendered, by Gresham's law alone, a fantasy. I'm sorry to be the bearer of bad news, but the framers of the Constitution had no idea what they were doing or whom it would ultimately benefit, unless they were under the sway of bankers, which is always possible, because the sole reason for the Constitution was to enable the new national American government to borrow money, just like all the monarchies in Europe and elsewhere. The truth is, that even were a Constitutional silver based money system to be reinstated (which is exactly what it would have to be), likely very little actual silver would trade openly, although it would most certainly trade behind the scenes. Who would be doing most of this physical trading then? The same people who do most of it now; bankers.

The basis of fractional reserve banking was the original goldsmith and silversmith thievery of purchasing power for all other goods, capital assets, etc. through issuance of “bad notes” that were in number many times the value represented by their actual reserves. Surely, were the gold or silver standard to be reintroduced, and of course fractional reserve banking to continue, though there wouldn't be a central bank, these banks would again begin to circulate their equivalent of what we used to call “national bank notes.”
a national bank note example
They'd be about as good as the bank stayed solvent, as at most times they wouldn't have the specie to pay out, they'd all be virtually insolvent, what a joke! What I'm saying is that either we'd see the government return to issuing genuine gold and silver certificates (paper money that they actually have NO Constitutional authority to issue) or far more likely, the national bank notes would again predominate in circulation. A few vendors would actually offer sales in specie, but come on folks, these are so called “precious metals” after all and are really too expensive in and of themselves to want to be used as circulating money.  

What I'm describing here is about what we had during the last quarter of the 19th century in the United States, a period of economic stagnation punctuated by bank panics. This return to so called “hard money,” this so called “monetary reform,” which is advocated far and wide, largely takes no account of the perils of wildcat national banking, of state chartered “public” corporate strangleholds on every conceivable market in the land, to drive out competition and stifle innovation, of government regulations and other busybodies mucking about and forcing small businesses that can't afford the regulations in order to compete to close down, increasing unemployment, because let's face it folks, these Goliath corporations and governments just can't employ everybody.

And of course we'd consider what such reform would do to our governments, which is to say that none would ever be free of bank debt, so taxes would be perpetually stuck high or go higher just to pay the interest on all that borrowed money, whether “backed” or not; we'd still be debt slaves to the bankers. Some apparently think, stupidly in our opinion, immature too, that just rolling things back to the way they were sometime in the so called illustrious past, would be a good enough reform when it clearly would not. In fact such naive ideas are so idiotic and babyish that they deserve to be tossed right into the trashbin of history! The traditional idea of gold and silver backed money is the banker's dream. Wake up! Both fractional reserve banking as well as so called public corporations, which have no basis in Constitutional law, simply have to go. Since we can't make them go away, all we can and should do is walk right straight out of them; stop working for them, boycott trade with them, etc. For example, there are upwards of 20,000 supposedly working for Monsanto, which some consider the most evil corporation of them all. Why are they working for Monsanto and others like them? Don't they know what they are doing? There will come a time when “he worked for Monsanto” will be the worst possible blight on one's reputation. Recall all you John Galts out there, that the John Galt resolve was to leave their system hanging, since as everyone surely knows, those at the top have not the technical expertise to run their own system, because it's too damned big!

So let's get back to some basics. First let's get rid of the notion that money is ever a commodity. This feature will ultimately doom bitcoin too, although most don't know it yet. Let's replace the “money as commodity” idea with the clear observation that money takes its meaning only from the transactions it clears, the simple accounting functions in trade. All money is doing is splitting barter. In such a system, which we'll refer to as credit clearing from now on, money is created and it is destroyed. Indeed, money creation and destruction may be so rapid that while much trade occurs, the amount of money in existence may have negligible significance in terms familiar to the usual speculators who are always able to play their games with “public” money because all of it is a commodity, as is bitcoin. In a credit clearing system, the prices offered for real goods and services and accepted in sales in Valuns tells the business community what the members are willing to spend rather than how much money might be floating around, in existence or in circulation. Providing this information to IE members might be a valuable reporting service someone may be willing to make, for remuneration in Valuns of course.

There would however be pools of liquidity (savings) in a mature VEN, the result of under spending by members and of trading other money into the Valun based VEN. We have explained many places on this blog that we don't want any of their money, but we would hold gold and silver bullion, which can be easily traded back for “public” money, chiefly for the purpose of paying their taxes; “pay unto Caesar that which is Caesar's.”

We would note here that

1. No IE member actually exchanging “public” money for Valuns need concern themselves directly with specie. A Valun Counter (VC) would be like a typical foreign exchange counter anywhere in the world, except they'd be private, not open to the general public. They'd be open limited hours each business day and at the end of each and every day, a currier would take those nasty “bad public notes” away to a precious metals dealer to be cashed in for bullion, which would reside in a vault somewhere else. In any case, no member is left waiting, they get their Valuns right away.

2. If an IE member brought in specie to exchange for Valuns, we'd probably still have a list of only those coins we could accept on their face. Anything non standard would have to face the scrutiny of a metals dealer, a B member within the IE, who upon acceptance of specie, would then issue a date stamped paper receipt to the member indicating that so much specie had been added to the IE's account. The member would then take this receipt to the VC to receive their Valuns.

3. To begin with, Valuns will essentially take 2 forms, as bookkeeping entries on the ledgers of each IE and as checks. Checks would be of two varieties; private and pre-paid

The pre-paid V Check

The closest thing to what we have in mind for the pre-paid variety is probably the traditional “traveller's check” that one used to take overseas for cashing in for their money. These would be made durable enough to withstand a minimum six month usage. They would have an IE specific design on the obverse (front) side and an ad by one of the B member businesses on the reverse (back) side. These checks would thus double as advertising. The obverse sides would contain all the information required for any VC operating anywhere to verify a check's authenticity and any counterfeiting would be rendered so complicated, with so many designs out there, that no one would ever be foolish enough to attempt it.

Members come into a VC with “public” money and want V Checks in return. To begin with, V Checks will be issued in 1/2, 1, 2, 5 and 10 Valun denominations. As they become more popular, larger denominations could follow. In order to stay within current law, at no time would any of these be worth less than a $1 Federal Reserve Note. At inception, 1/2 Valun would have represented $1.08 in value, today (11-12-13) it represents $1.37 in value, more than enough buffer to satisfy laws regarding the comparative value of circulating alternative monetary instruments. At present, US law forbids competing coinage with values less than $1.

Of course this limitation only applies to widely circulating monetary instruments, not personal checks or ledger entries (deposits). The intention is for the proposed V Check to fall within the legal realm of “physical cash.”

Checks however are another matter from “notes” which are “evidences of debt” in any case. Checks are private agreements between members of the IE to accept in trade and settle barter. Members tender their “public” money for V Checks. The following sequence would be followed:

1. Receive the “public” money: the clerk fills out a brief form indicating the amount of “public” money, the comparable number of Valuns accepted in the trade (which changes from day to day based on the previous day's closing spot price for a troy ounce of gold) and the member's account where the Valuns are to be credited. Another clerk (VC's will normally be staffed with at least two people) will execute these transactions; Valuns are deposited into the member's account. A one tenth of one percent transaction fee is charged, which goes into the IE's account. The “public” money will go into a sack or locked box to be taken off premises after business hours every day.

2. Deliver the V Checks: After the Valuns are credited to the member's account, the member is asked how many and in what denominations he wants his V Checks. Let's say he came in with $100. On 2 November, 2013 that works out to 34.84 Valuns. We will be operating an accounting model that includes fractions of Valuns down to the hundredth of a Valun, a cend (or fen), but for now, only the private check (to be described later) would offer a means of transferring fractional Valuns.

Let's say the member wants V Checks for 30 Valuns and wants them in denominations of his choice. That could be up to sixty 1/2 Valun V Checks or as few as three 10 Valun V Checks. Thirty Valuns are then transferred from the member's account into the IE's V Check account. There is always a transaction fee of one tenth of one percent for every movement within the system, so on 30 Valuns, that's 30 cends (or fen).

The clerk takes out the number of V Checks requested and stamps each one with a date six months from the date issued and hands them over to the member. The member will also receive a receipt in case his V Checks are lost or stolen. On the date stamped on each V Check, it expires for lawful circulation, but the member can still do one of two things, since the money is still in the IE's V Check account ready to be spent or deposited (moved out of the IE V Check account into a member account).

V Checks can either be deposited back into a member account or replaced with new V Checks, with a new expiration date stamped on them. If the member decides to deposit the V Check, the same steps that issued it are used to retire it; the clerk again fills out a transaction form and hands it to the clerk making the transactions. Funds are moved from the IE V Check account into the member's account, the transaction fee is paid and then the clerk VOIDS the V Check (either an indelible ink stamp or perforation stamp would be used) and hands the member a receipt indicating that the Valuns represented by the voided check have been deposited into the member's account.

VOIDED V Checks are, at this point, really the IE's property and may be kept for internal reporting purposes and then shredded. Typically an IE would like to know which V Check denominations were getting the most usage. This information would determine what volume of V Checks to order from the IVES, which will decide who will produce them ()probably many smaller printing businesses, B members of each IE) and what standards are required.

Could a member save V Checks as if they are saving cash? Why not? Even if they expire as circulating vehicles after six months from issue, they can always be deposited or replaced. What about the money in the IE's V Check account? It stays where it is. It is NOT used as the pledge for any loans, it is literally money (an accounting book entry) that the IE pledged to keep to retire its V Checks. It isn't going anywhere until the V Check holder decides to do something with it. That could take generations, couldn't it?

Might someone get a V Check for something and then just pass it along to someone else in payment for something? As long as this occurs before the expiration date, they certainly can. But they'd have to be an IE member to either deposit one or tender one for replacement. Anyone receiving one close to expiration may either deposit it or receive a replacement from a nearby Value Counter.

This solution provides a limited circulation monetary instrument that can be extended indefinitely by any IE member operating anywhere in the world.

Personal Checks

E. C. Riegel understood that checks were representations of money and probably considered them among the most liberating inventions of the times. He imagined all sorts of things that can now be done much faster and better than could be done in his day. Books of personal checks certainly could be issued, again in a variety of designs, but having certain interesting differences from current checks. As Riegel suggested, they could be written for any amount of Valuns (as long as the member had those Valuns on account), but given the vast array of snooping that's been going on lately, people would like to retain as much privacy as possible. Why not have the personal check identify a member account rather than the name, address, etc. of a member? Why not further identify the owner of the check by the account number instead of personal information?

Here's the idea:

The IVES Standard identifies a sequence of numbers like this 0-00-0000 for each IE. Each personal check would reference these numbers. (Each V Check as well) An additional six places follow these, 000000, as an account number in hexadecimal for a total of 16,777,215 possible accounts per IE. That's clearly more than enough, as others have suggested, that some Valun communities might begin as quite small (1,200) or up to 12,000. I was thinking more in the range of each independent exchange serving a maximum of 50,000 with maybe as many as a dozen Value Counters (VC's) serving each exchange.

Anyway, you'd have on each personal check the issuing account number and a space for initials and spaces for the receiver of this check to write in their account number and a space for their initials ... and that's it. It would state in numbers and words the number of Valuns and cends (fen) to transfer. Transaction clearing charges apply, one tenth of one percent, and the check issuer always pays. This would be the way to move very large numbers of Valuns around in a VEN; if a member had the Valuns, they could write a check as large as necessary as Riegel recommended.

Extensions of the IVES Standard 

We began with the 0-00-0000 representation and determined that the first three positions, 0-00, would represent continent and country. Therefore:

China is 1-08
India is 1-10
Japan is 1-15
Russian Federation (Asia) is 1-32
Egypt is 2-15
South Africa is 2-45
Canada is 3-05
Mexico is 3-16
United States is 3-23
Argentina is 4-01
Brazil is 4-03
Colombia is 4-05
France is 5-16
Germany is 5-18
Italy is 5-23
Russian Federation (Europe) is 5-38
United Kingdom is 5-47
Australia is 6-01

Within each country the last four positions, 0000, are sort of up for grabs. Using decimal notation, this amounts to 9,999 possible IE designations within each country; more than enough. Using hexadecimal notation, this amounts to 65,535 possible IE designations. The role of IVES will include the registry of these IE identifiers so that, as we said, every last piece of paper used in the system can be properly identified.

Some have suggested that the first two of these four positions, 0000, should represent states or provinces (departments) within a larger country, where all but the very smallest countries usually have geographic subdivisions. If hexadecimal is used this allows up to 255 subdivisions within each country and up to 255 explicit IE designations per subdivision; more than enough.  We will not be able to determine whether any of these is definitive without convening a properly constituted IVES. We're still quite far from such eventualities. What we need to move forward are steering committees whose first objective is to educate their friends and neighbours concerning the proposed Valun and the local trading communities, VEN's, that would grow from such efforts.

But perhaps our greatest problem is that most people have become used to offshoreing and outsourcing their own thinking and action; letting others do it, rather than taking fresh looks at the world around them and realizing that only they alone are capable of affecting real change for the better. Yes, our biggest mistake was assuming that even a state could do things for us that we should have long been doing for ourselves. It's long past time to grow up.  The road out of serfdom and genocide will take time to travel, as it has taken those who wish to enslave and destroy us a long time for their powers to grow to such unprecedented extents; “who can stand against the beast?” They are confident, certain and have stolen the money power, which is absolutely key to everything else. We are used to having people do things for us because we have had better things to do like waste our time watching something on TV, the “image of the beast,” that might make us laugh. What a way to go through life!

Nothing will change for the better without us getting up from such stupid preoccupations and getting to work on our own behalf, for our children, for our grandchildren, for the future of humanity, peace on earth, etc. The first step is getting people together in your local area to discuss the proposal presented on this blog. We look forward to hearing from you.

David Burton

* or perhaps Henry Dunning Macleod

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