Monday, March 10, 2014

#56 VEN Money Flows

A representation of 10.5 Valuns in V-Checks
“The fact that only those without money can be money issuers shows that the adequacy of money circulation requires adequacy of issuers, and that the supply can never be adequate for a healthy economy when the number of issuers is restricted.”
E. C. RiegelNAF Chap. 4

The Value Exchange Network (VEN) is a name for a private market. The monetary unit in such a market is the international standard Value Unit or Valun.

Value Units Enter the VEN

Valuns enter the VEN in three ways:

1) Valuns are created by the impecunious (the poor). We all begin with “red inked” accounts in this market; we begin with what we'll call from now on “operating overdraft”

Operating Overdraft – within VEN parlance shall be those Valuns each A member has the permission to issue. Each and every A member starts with 200 Valuns

2) Valuns are bartered into existence by exchange of all other currencies using precious metals (gold and silver bullion) as an intermediary.

Those bartering dollars or any other “public” currency for Valuns receive the equivalent number of Valuns as described here.
  Currencies are used to purchase precious metals, which stores shall be the custodial property of each local independent exchange.

3) Valuns are issued in the process of being paid for work. This shall be where the lion's share of new Valuns come from. The process will take the form of self financing of all employment; all Valuns ultimately paid for work done will have previously been created by the A member employee as part of the terms of the contract under which he is paid. Again, in case someone isn't getting it, yes as a fiat issue from nothing. We have called these contracts “Labour Contracts” in all cases, but perhaps we shall come up with a better name for them.

B members are businesses usually made up of A members; they may have employees who are not affiliated with the VEN as A members. Each A member can enter into a contract with a B member for employment that specifies the amount of Valuns to be paid to the employee on a schedule of specified pay dates. At the beginning of the contract, the B member business automatically gets Valuns equal to the entire contract to use on a float basis until the employee must be paid. This is true for all A member employees from the director to the least paid worker. This forms the basis for trust between employees and employers. Knowing what one is worth becomes more important too as a business would like to have that float, particularly if the pay date is scheduled three or more months in advance. Right now, running in parallel with the existing system, with nothing to redeem for Valuns, they have the status of potential stores of purchasing power; savings

Wouldn't it be possible for someone to loan themselves a tremendous amount of Valuns in a business they run?

No, because every business has to “pay its own way” (See our definition of Profitability below). If it were to excessively pay someone more than the sales they took in, obviously they would go bankrupt and fail. We expect that something like this might be going on in globalist corporatedom on a mega scale, but the subject doesn't even concern us.

It should be understood that these Valuns spring forth from the A members themselves, not from the local IE, not from IVES and certainly not from the B member employers or anywhere else. At the beginning of a contract involving work, the business gets the money on the first day of the employee's work and pays it back to the employee on specified pay dates. The transactions for doing all of this are scheduled by these contracts and the IEs carry out the transactions as part of their regular instructed duties. Riegel's complicated, excessively burdensome ideas for implementing the parallel payments in Valuns were perhaps one of the chief reasons his ideas went nowhere. No business wants to be burdened with more paperwork or bothered with anything more they have to do for someone outside their business. They want to pay attention to running their business. So, the technicalities of all these parallel payment arrangements will be handled by each local independent exchange.

This float might not mean anything right now, since there is no organized VEN, but we can't say that will forever be the case. We expect that all we need do is provide the means and a lot more will result.

Value Units Leave the VEN

1) Taxes. You simply can't get away from them and where they are due and payable, in their money not ours, we make provision for it. The A member submits an applicable tax bill and the IE takes the equivalent number of Valuns from the A member and sells the required precious metals to raise the tax money. The corresponding Valuns are destroyed in the process.

There are some out there with what may turn out to be a valid argument concerning income taxes. We're open to any informed opinion here. They say that since all money earned through employment within a VEN is actually created and lent to the businesses before this same money is paid back to the employee, that the income stream to the employee isn't really taxable income, but amounts to a short term loan at no interest to the business from the employee. We note that money lent without interest, without more than the exchange in time worked to get it back in pay, as the business enjoys the “time preference” value of the float, may turn out to be the most revolutionary idea in E. C. Riegel's quiver. This may turn out to be more significant in savings for both employees and businesses than any can foresee right now.

2. Money always disappears into things that were bought, especially anything paid off on time. For instance, let's suppose you buy a refrigerator for $400. But you paid that price due to “exercising your time preference” and buying that refrigerator now rather than waiting until you had say $200 which is what the refrigerator cost for those who had the cash. Two identical refrigerators. The one on the left cost $200 while the other cost twice as much. Where did $200 extra go? Some of it certainly ended up with the person who bought the refrigerator on the right at or perhaps even below the cash price and sold it to the customer on time payments. Both refrigerators are depreciating in value from point of sale. The one on the left could be sold the day after it was bought for perhaps 90% of its value, the one on the right sold a day after the last payment was made, could obviously not be sold for what was paid for it. It has automatically lost at least half its value compared with the left hand refrigerator.

The same concept goes for anything including capital goods, land, buildings, anything. So what gives value to anything? The work done to make whatever it is productive and then profitable; able to pay its way.

Profitability - within VEN parlance shall be the ability for a B member business to pay its way; to cover all expenses and retain a portion of what they earn to cover emergencies.
  
A members become “black operators” when the amount of money they earn tallies against the amount of money in their Operating Overdraft, cancelling all money created out of existence. Anything more that any A member earns is clearly money he received for work done.

All businesses suffer emergencies and most businesses are chronically under capitalized. There will certainly spring up around each IE those businesses that can and would engage in finance activities to help businesses out. We expect a lot of crowdfunding techniques. We'll certainly be discussing this entire area. But we'd prefer to see strong and sturdy small and medium sized businesses of kinds that may be run year in and year out at a certain predictable level, providing regular employment for a certain number of people. These kinds and sizes of business are at present almost impossible to get started. We'll explain exactly why much of this is so and how to begin to think and work our way out of it in a future post. We've set in some of the groundwork for that discussion here.

3. Money that is issued by any A member is destroyed when that same A member accepts the same amount in return for goods or labour sold. We have two instances of this:

a) An poor A member who may decide to either sell something or get a job takes Valuns back. All Valuns he is paid cancel out any he has already issued and spent into the VEN.

b) A regular wage earner supplements his earnings in “public” money with a parallel stream of Valuns that he had previously lent into existence and loaned to his employer interest free until he is paid.

The same Valuns issued are redeemed by the issuer in a monetary circle that may involve many changes of hands. Much of this was discussed here

What you're describing is a loan at zero interest that is paid back as work is paid for. I don't see any way that any government could interpret such a situation fairly as a taxable event. Have you perhaps stumbled upon the solution to income taxes?

They'll contend that the money was created out of nothing (when all theirs is just the same) and therefore that the loan is a fake. But between an employee's first day of work and his first payday, the business gets to buy something it needs with those Valuns from anyone in the VEN, so it really is a loan at zero interest just as you say. Nevertheless, until we get more informed advice on this, we have to proceed with caution.

Working Capital

Working capital is tied up in businesses, but everyone needs savings because there are always emergencies. We hope and trust that Valuns will be a sufficient savings vehicle that sufficiently preserves its purchasing power over time, that can in fact rest idly to be called to action when needed.

Trading within and among IEs
This figure depicts three IE's (A, B and C) and shows that each has a specific interface to settle transactions (AB, AC and BC). These areas describe bundles of transactions. Yes, each transaction has three parties, the buyer, the seller and the bookkeeper. People talk all kinds of nonsense about two party vs. three party sales. So, we'll state it as frankly as we can: All sales involving precious metals are three party transactions too; the buyer, the seller and the metals dealer. Oh, they'd love to exclude him. It makes their pleas for nothing but gold and silver sound better to more gullible and lazy people who don't even know exactly why they're buying precious metals. When there are time payments involved for any sale there are perhaps four parties to the agreement and perhaps more. Anyway within each area are transactions involving members of these IEs. All of the shaded areas represent the VEN. It could begin as simply as IEs starting up in three adjacent rural counties. Some states, California for instance, might very well have three IEs within a single county. Each IE and its businesses are depicted on the V-Checks they issue. They all have designs accepted by IVES. The descriptions of all transaction processing is also under the administration of IVES.
 
This figure depicts three IE's, each hosting (for want of a better term) several Valun counters. VCs are the external people interfaces of each IE, they may be separate businesses (B members) sharing transaction fees with the IE or they may be run as subsidiaries of the IE.
Here, we see two clusters of IEs separated from each other and operating through non VEN operators.

Non VEN Operators (NVO) – within VEN parlance an NVO shall be non VEN member businesses doing business with VEN members.

Note that all NVOs in the illustration have relationships with one or more IEs in each cluster. To some, the idea of a VEN (the transactions of one or more IE's) could be adapted to mean the total transactions of each of these clusters. But we want to get across that the money and its value structures remains the same whether clusters of IEs are separated from each other by distance or some other artificial consideration. Of course conditions based on supply and demand modify this somewhat from region to region. Trade should normally flow freely among IEs, unless some abnormal pattern of transactions is detected, in which case IVES is notified and a VEN wide bulletin might be issued. Each and every IE can decide to suspend dealing with any IE that falls beneath standards, so penalties for breaking rules will be quite severe. The rules are simple and benefit everyone in operations involving trust. Why shouldn't they be as severe as being thrown out of the VEN for a considerable period of time, etc.?

We note that all money in the VEN created by poor members and not cancelled by them by taking back any money for goods or labour, is fair game to any business operator willing to attract and use it. We further note that were all employment to be by contract as loans at zero interest, regardless of the tax implications for the employee, that the business from now on takes an entirely different view to labour costs. If the business is not strictly speaking paying for its own labour, then all that needs concern them are all other expenses except labour and the retaining of earnings as savings against emergencies. This is a recipe for making very strong independent businesses.

David Burton
venlead2013@aol.com

[11 March, 2014: So Valuns really would be our money since we would be issuing them for any work we do.

Yes. They are an expression of a legitimate extension of each individual's private property.

Can you see a time when people might demand to be paid in their own money?

LOL, yes. All one needs is to experience more inflation, stagflation, recession, depression, etc. to know that the present monetary system and its so called economic planners have always been at the same game; pilfering from the public, etc. Of course along with this, from time immemorial, they have also planned wars, which are their harvest.

By a business “paying its way,” you're using standard balance sheet accounting?

Yes.

Do professional partnerships qualify under proposed IVES rules?

Yes. Partnerships are as old as time. They are always acceptable business structures. Each partner is considered a part owner in the enterprise even if various partners own disproportionate percentages of the whole business. Such businesses in fact should make up the majority of all qualified VEN businesses.

Will there be any age limits for opening accounts?

No, well only one. Recall we require for new A memberships:

1) Domicile: you have to have lived in the area where the IE operates for one year and possess the right under local law to live there.

2) You need to have recommendations from 2 A members. 

Any child of two A member parents is eligible as a one year old. There aren't any limits on the other end either. Assuming one remains sensible into great age, there is no reason why they wouldn't be allowed an account.

You mention venture capital. Let's say someone out there really thinks once this gets going he'd like to convert some huge amount of money, like a million dollars, into Valuns. How would he make money?

His objective would have to be home in the VEN, actually making and being a part of it. You'd only be doing that by owning and running a real business. We are about ultimately renouncing the present system, not trying to make any more money using it. I did not mention any way out of this system back to their system except paying taxes ... or selling something made within the VEN outside it for dollars or something else. Hence, this is not to be just one more “get more rich quick” scheme for plutocratic psychopaths. With sufficient funding, many businesses can transfer away from their “public” money base and eventually to a full VEN status.

What would you say are the best ways for capital to participate in the VEN?

When the VEN gets going, the best opportunities are going to be refinancing businesses out of the present system into the VEN. The same goes for residential real estate. We aren't taking dinosaurs though, the too big to fails, corporations, governments.

Have you given thought to public employees? Since governments would not be members of the VEN, how would Valuns be paid to them?

We're thinking about another set of contracts for them that involve the IE itself, except that the IE would have no purpose in using any of the float that would normally be generated. Otherwise the contract would look the same; a parallel set of transactions would deposit Valuns in their accounts on each pay day. Such contracts are really between someone doing a job considered essential by the members of each IE. Such matters would require a vote of at least 2/3rds of the members of each IE to become active policy. Three IE's deciding to do the same thing would raise the issue to IVES and if the majority agreed, it would become VEN policy.

You have this thing you call domicile. If I get to be an A member in my area, can I move to another area and retain my A membership?

Yes, you can. Your domicile (home) IE is the one where you are an A member. The rule only applies to new A members. It would normally be a good idea to establish yourself where you are if you can, unless it was always your intention to move somewhere else for which you had a previous preference. When you move, all member accounts will be transferable between IEs, but you can only be an A member in one IE. You can choose to retain an account at your former IE, but you'd be a B member there and would have to maintain profitability; “pay your way.”

Most people decide to move based on deteriorating conditions where they are or opportunities elsewhere. Over time there would tend to be far fewer differences in basic living standards from one area to another.

What would be your long term prognosis for price levels generally under the Valun system?

When prices find their own level within the Valun yardstick of value, they will tend to move less violently up or down and over time may remain nearly flat, subject only to differences in local supply and demand. Actually we would anticipate that the Valun price structure would provide a far more accurate appraisal of the relative value of goods and services in each unique area.

If you were to choose between buying an ounce of silver every month or an ounce of gold which would you choose?

Silver has outperformed gold.

How has silver performed in your proposal

At inception, one ounce of silver would have bought 19.44 Value Units.

Now we're at 11.94 Value Units, which means silver buys less than it did in 2011; 7.5 Value Units to be exact or down 38.58% against the Valun. Remember we're talking about a piece of purchasing power defined by a thousandth of a single transaction that would have occurred at a particular point in time. That piece of purchasing power does not change regardless of what the bullion brokers decide the trade in “public” money would be. Since our system measures gold and silver independently of each other, gold has fallen only 23% against the Valun since inception. Though this indicates that silver has fallen farther than gold, we expect long term that since every currency on the planet naturally inflates by design, that buying any gold or silver on a regular basis is a wiser investment strategy than almost anything else. Of course, we have established -at least in abstract experiment- something better than precious metals or any other currency, else why would we be advocating it? That vehicle is not yet in existence.]  

[12 March, 2014: Was intrigued by your description of NVO's. At the beginning wouldn't every business be an NVO? 

Indeed they would be. The illustrations were merely to give people the idea that one might function between clusters of IEs, but right now we consider any business organized as a sole proprietorship, partnerships, and even situations where people are limited partners operating under direction of a general partner are fair game for our message. If they wish to remain in business, if they wish to escape from the present system, which we maintain is shaky and will come down eventually, then we offer the best alternative to secure independence. 

I also saw somewhere you mentioned IE's not being able to keep dollars, etc. 

Under current legislation here and elsewhere, through intellectual copyright law, they have the right to interfere directly in your business. Obviously we don't want any of that. This was but one more reason for our Valun proposal. 

Do you think they would care if we made side deals in local currencies? 

They really wont care as long as taxes in their money are paid. Businesses make sure they know the valuations in the alternative currencies they allow and determine the taxes in “public” money. They tend to save their “public” money for paying taxes and anything else that can't be paid in alternative currencies, but gradually over time they wean themselves from reliance on “public” money, including refinancing their real estate in alternative currencies. Public authorities would still be determining taxes based on prices in “public” money.

We'd further remind our readers that the Valun proposal is for a universal standard of commercial value measurement that stands apart from alternative currencies that use the “hours” or “discount” basis with reference to their “public” based currencies. The other alternative currencies will go up and down with the dollar, the Valun will not.] 

[13 March, 2014: It seems to me that you are making a profound observation in your proposal for Labor Conrtracts. They are Labor Contracts, but the reverse of what everyone thinks of. People go to work for other people but the people who pay them normally decide the pay and hours, etc. Under this proposal, labor is your own resource that you lend to the employer for its full value prior to working to get the money repaid to you. It's an entirely different concept. It should be tax free, but I'm not an expert.
 
Thank-you, we'll just have to see about that. We'll need for all Labour Contracts to be described, recorded and operate basically as the reverse of Credit Contracts. A Labour Contract under VEN rules allows the employer to the float on the entire value of the employee's time, repaid on a schedule of pay days. All the money issued is cancelled upon payment. A Credit Contract under VEN rules allows the buyer to have his “time preference” for what he buys, repaid on a schedule of pay days. All money involved in these must have already been created. These are the two building block agreements that run the whole system. Together they re-emphasize a “work to own” mentality, that is a basic cornerstone of civilized society.]

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