Tuesday, August 2, 2016

#93.1 Updating Riegel – Valun Issuance


I had wanted to do a piece on this for some time to make the similarities and differences between Riegel's original design and the present proposal very clear. In Chapter 6 of his Private Enterprise Money (PEM), Riegel begins by saying this:

A money system is a vast accounting mechanism. The private accounts that are kept on the millions of ledgers of private tradesmen are all auxiliary to this master ledger which determines the meaning of the terminology in which these individual accounts are kept. Disturb or distort the master ledger and you affect likewise all the millions of subsidiary ledgers in the economy. Society must have a stable money system to preserve its own stability.

First: A money system is a vast accounting mechanism. A machine, a human invention. We have been consistent in our insistence that in order to understand what money is, one must consider the network that it represents, not just its pieces, the circulating tokens. Those tokens, whether coins of precious metals or pieces of paper, are and ever always were just the external manifestation of money, the rest being matters of accounting. Recall we also said that economics was mostly … an apologetics for the existing system, and we are being far kinder than the subject actually deserves, but that accounting is essential.

The second sentence supports the first. His warning comes in the third sentence: Disturb or distort the master ledger and you affect likewise all the millions of subsidiary ledgers in the economy. Others have done and do a better job describing just how this master ledger in THEIR money system is and has been disturbed and distorted as the plaything of speculators at or near the top of the elite pyramid that controls presently better than 50% of the world's stated financial wealth. He concludes by saying, Society must have a stable money system to preserve its own stability. We pause to reflect deeply on just how this is has played out in our own time.

Riegel's broad pencil strokes are there; YOUR society needs a stable money system to preserve and enhance its own chances for stability and prosperity – we think also it's probable survival. If you are one of those dopes out there who advocates or thinks about dispensing with all money, here's my response: barter is barter no matter whether money is exchanged or not. Money gives everyone the FREEDOM to figure out what that barter is. If you deny money's usefulness, then you are abandoning a tool of great use to you and everyone around you for your mutual good and you are leaving the money issue, literally and figuratively, to THEM. Hence if you dispense with or relinquish the money power, you dispense with your own freedom, as SOMEBODY ELSE with their own agendas, will dispense the terms of barter for you. Indeed this was the state of things for a very long long time among people whose lives were generally “nasty, brutish and short.” Indeed we have already been through this going back through the middle ages into classical and ancient history when people were forced into using precious metals and those without them became slaves of those that had them. “Gold bugs” with their STUPID assertions that return of the present monetary order to any kind of “standard” based on precious metals, really advocate a return to SLAVERY and rigid class structures, intellectual pawns of the elites they supposedly oppose. It's all stupid and phony! Understood? You cannot do without money. So now on with it.

The basic unit as proposed, which for the time being we have called the Value Unit or Valun as Riegel did, is based on a transaction involving an oz of gold bullion at or near its close on November 2, 2011. That date becomes for our purposes, the Valun inception date. We chose a value of $2,160 as being what would have been required to actually possess an ounce of gold bullion on that date. Here are examples we have of Valun inception data for dollars and a few more currencies at Valun inception:

V1,000 = 1 oz gold = $2,160.00 = 1,573.75 = 1.359,69 = ¥169,509 = P66,409.05 all on the same inception date of 11/2/11.

That's right, a thousand Valuns would make each Valun at inception V1 = $2.16, 1.57, 1,36, ¥16,951 and P66.41 (Russian rubles).

(We have and shall continue to use the handy V in front of any amount to represent Valuns)

The proposed Valun is a piece of purchasing power represented by that transaction. If your local “public” currency was capable of pricing gold bullion on that day, then from then on you can determine what a Valun would be worth in your local “public” currency.

At inception V1 was equal to $2.16. Right now (8/1/16) a Valun is $2.65 because the price of gold bullion has fallen since inception. So today we ask how much gold would it take to purchase the same purchasing power as at inception? The answer expressed between inception at present value is 49 cents American or almost 23% more. There would be comparable figures for the rest of the currencies.

Before continuing, we remind everyone once again that we deliberately chose gold and silver to be part of our Figure 1 inception transaction for a number of obvious reasons, but one of them had to do with making the proposed Valun universal; it could be used anywhere local “public” money is traded for gold and silver. Gold and silver are also THEIR money, but this way we have slain two dragons at once, both THEIR paper dragon and THEIR metal dragon.

Riegel continues with a paragraph meant to demonstrate that money itself carries no value, which happens to be true. It was demonstrated in our review of Arthur Kitson's great work, which begins here, that you can take a gold or silver coin of some money and deface it so that one has nothing but gold and silver discs and the defaced coins are no longer accepted as money. The staunch “gold bugs” out there, whose obvious ignorance and insistence on nothing but precious metals “backing” for any and all money, have a hard time with this reality. Riegel then continued his clear explanation by saying this,

Now, because nicely engraved pieces of paper and pretty coins meet the eye, we are in the zone where the greatest superstition arises.

The tokens may be nicely engraved pieces of paper and pretty coins but they aren't ALL of the money that exists and their existence, one way or another, are only instances of money. We will not be able to mint coins yet as THEY have allocated that monopoly to themselves. Should the need arise, we would prefer some impervious to wear alloy and have each coin represent a specific weight in a set of weights designed to for use in various coin operated machines or to weigh other articles of known weight; precious metals coins in a scale. We even advocated calling such coins weights. Expressions such as, “have you any spare weights?” might very well arise.

For paper representations of OUR money, we have for the time being offered the proposal of a group circulated check with a six month's duration, drawn on an account set up for the purpose by each independent exchange. We called it a V-Check. We would want our V-Checks to have similar qualities as travelers' checks. Since they would only be intended for circulation up to six months (what mostly THEIR laws require) they do not need to be super durable but should be made durable enough to last longer. Eventually (as their laws permit) Valun exchanges would begin to use Valun Exchange Notes with longer circulation periods; seven years as they are notes. These too would be managed from an accounting standpoint exactly as V-Checks. Riegel concludes the paragraph with,

Neither the check nor the currency accomplished anything more than did the telephone call; all were instrumentalities of bookkeeping and each effected a money transaction.

Then he begins, How does the currency spring into existence?

He explains how one writes a check from an account authorizing the clerk/accountant to deliver cash in the form of the usual notes and coins. We could in this day and age have apps on phones texting between members and their accountant in the local IE. just as well as by using checks. Communication is the key, not whatever one's monetary tokens are made of. We would obviously require that all such transactions placed this way would be recorded and later included in transaction reports, the same as if they had been checks.

Thus the currency is just as much a creation of the check writer [or the phone app user/member] as is the check which requisitioned it. It [the currency -here representing Valuns or any other “public” money] becomes the equivalent of a certified check payable to bearer. No mystery, no magic, nothing awesome. [That's actually how he put it in the original!] When the currency returns to the bookkeeper, it is credited to whoever returns it and charged back to the currency authority where it is held subject to some other requisition for it. Note that the currency sprang out of a book account, just like the check and that both, therefore, have the same basis.

In other words we wont care what form it takes, a Valun is a Valun. He continues,

The currency under the valun system will of course be manufactured at some central plant where adequate safeguards will be set up against theft; and the counterfeiting problem will exist as it does with any money system. It will be the duty of the Central Board of Valun Exchanges to provide the currency in bills and coins on demand of the various Exchanges, so as to provide uniformity and central control.

Our proposal handles this differently. We do NOT expect that all Valun currency will be produced at a single plant, but we expect it all to conform to certain standards particularly for durability. The variables are rather the identification of each issued V-Check (later Exchange Note) and eventual coins/weights, should they appear. These matters would be known and recorded and distributed for use among the exchanges.

What he calls the Central Board of Valun Exchanges we have decided to call the proposed International Valun/Value Exchange Society or IVES. It will have representatives from each local independent exchange and be designed as the servant of all the exchanges not its director, the judge of all settlements involving Valuns within the valun exchange network (our VEN) and perhaps called in to determine matters concerning membership issues at an exchange level.

Each exchange would decide who in its area of operations qualifies to be an A member and these can and would form associations that would be the business B members. If our visible money tokens have as many designs as possible and they change all the time, it will be the numbers and currency (literally whether or not the numbers on circulating tokens are valid) that matters in determining whether a token was legitimate or not. Riegel says something VERY interesting here,

The promise to pay and promise to redeem or exchange - forms that are used on existing money instruments - will not be used. There is nothing to pay and nothing to redeem in true money. Its [true money's] purpose is to requisition goods and services, and not to requisition some other form of money. The check form need but say, "Credit the account of .................... and debit the account of the undersigned."

There is nothing to pay and nothing to redeem in true money.

There is nothing to pay and nothing to redeem in true money.


The proposed international standard value unit or Valun is THE proposed basis for OUR money. There is no basis beyond it. This means there will NOT be any means of trading out of it. This represents a change in our understanding of what's needed from Riegel's time. You can exchange your “public” money in, you will not be able to exchange it out, as there is nothing beneath a Valun to be changed into. In this way, all money laundering potential in our system is removed forever. Valun exchange maintenance, determining what the present value of the initial transaction is from day to day, is an IVES function, but certain functions would be determined only after called upon to act by a majority of exchanges.

Then Riegel begins to talk about the exchanges themselves. His implementation is going to be different from the proposal too. He says there should be an exchange for each state. Perhaps for very small states this would be best as there are fewer people to serve. But larger states and even cities are going to require many exchanges to handle potential business. Riegel had an idea for branch offices he called Valun Counters or places where one would go to affect the usual banking functions. He approaches it as a franchise operation. We do and we don't. We would prefer our exchanges to be more local and unless necessary have fewer offices than do banks. We would also prefer them to be centers where people find other members with work they need done and can post their requirements in these offices or eventually on some on line website. NONE of our offices will be walk in to the general public. They will ALL be private and you will have to have some membership ID device that lets clerks/accountants within each office know who you are, etc. These are to be thought of almost as private community centers in service to their members.

Members requiring currency would issue checks payable to the Counter dealer - who would surrender the currency just as is now done by banks. If a member wished to dispose of currency, the Counter dealer would issue his check for it. If the member wished to store cash with the Counter dealer overnight or the weekend, he could do so and be guaranteed against loss. The Counter dealer would of course have to provide himself with a safe and adequate burglary protection. The currency would be available to the Counter dealer from the Exchange by some safe conveyance; but it is believed that there would be but little occasion for currency to return to the Exchange - because a dealer finding himself long would probably also find some other dealer, in the same city or neighborhood, who was short - and who would buy the surplus with his check.

In our proposal, the counter dealer is replaced by a cash account in each exchange, not a universally used account. The check written may be a simple slip of paper requesting a withdrawal of the number of Valuns from the account to cash (in V-Checks) or even a text from an app. The Valuns move from the member account into the local exchange cash account and the paper Valun tokens are issued from there.

The various local offices will probably NOT store cash for their customers. They will use vaults, whether on premises or not, for all the gold and silver the exchange buys with any “public” money they receive.

The V-Check is basically a numbered paper blank without an expiration date and those can be stamped using some indelible method. It is not considered passable as money without an expiration date. When V-Checks are deposited into a member account, the V-Check is destroyed and its number removed from the system and that's that. They have accomplished their reason for existence. Any counter within an exchange can run out of blanks and will need to order more, but they wouldn't have such a system as described here. Riegel plunges onward ...

The secondary function of the V. C. C. [Valun currency counter] dealers would be to buy valuns for dollars, or dollars for valuns, at the current rate of exchange.

Nope, they would buy Valuns for dollars all right, they would not buy any dollars for Valuns unless a valid tax receipt is presented. This would require the exchange to sell gold or silver to meet this request. This provision eliminates money laundering which was not perceived as a problem in Riegel's day but is in ours. Parenthetically all money laundering is used to hide from whence the money comes or to evade taxes. We do NOT want to be involved with either of these common pitfalls. 

Since all valun members would (at the outset) be obliged to do business on both a dollar basis and a valun basis, and since some non-members would sometimes come into possession of valuns, the need for such "foreign exchange" service is obvious. The existence of such a money market would serve the additional purpose of establishing an official differential between the dollar and the valun, for the purpose of pricing goods and services in both units.

It is unlikely using V-Checks that very much of OUR money would ever land in the hands of non members. The “money market” he describes is something handled nicely on a spreadsheet. Each business day it is determined what a Valun's equivalent would be in dollars, euros, pounds, yen, rubles, etc. based on the prices of gold and silver. Prices for common goods are easily rendered by taking the dollar, euro, pound, yen, ruble, etc. equivalent and dividing that by the present value in those same currencies of a Valun.

If a Valun is $2.65 today, something selling for $1,000 is V377.36

To begin with we pretty much set Valun prices by whatever is comparable in other “public” currencies. Riegel continues,

The Counter dealers would be organized in the Valun Currency Counters Association and would report their valun-dollar dealings daily to their central office where the exchange rates would be determined after business hours every day, and wired to the members of the Association every morning. These rates would of course be determined by the law of supply and demand. If valuns be in greater demand than dollars, the dollar price of valuns would rise. If there be greater demand for dollars, the dollar price of valuns would decline. It is expected that there would be a continuous trend favorable to the valun (i.e., the dollar price of valuns would show a trend rise) but there may be reactions, and the daily variation would probably be irregular.

This is a cumbersome and unwieldy implementation. The “exchange rates” would be done by IVES and placed somewhere on the web (and by other means) as it is done here.

He says all this, knowing he intends on basing his valun on the dollar, 

These rates would of course be determined by the law of supply and demand. If valuns be in greater demand than dollars, the dollar price of valuns would rise. If there be greater demand for dollars, the dollar price of valuns would decline.

In fact the prices for things out there may NOT be determined by the laws of supply or demand. We don't care. We accept THEIR shifting figures against our unchanging piece of purchasing power from inception. The laws of supply and demand for Valuns will function within each exchange and among exchanges as required and not whether there are competing desires for more dollars, euros, pounds, yen, rubles, etc. over which we have no control. No, we've eliminated all that by sticking with a transaction having to do with something we CAN for the time being hold; gold and silver.

Riegel wanted to foster as much independence as he could, but we are dealing in a different technical era with a few advantages. He says,

The V.C.C. Association, as it announced the daily exchange rate, would supply a guide to merchants for the double pricing of their wares in valuns and dollars. Thus if the valun rate were announced as $6.65, it would mean that any merchandise bought by the merchant on a valun basis and given the usual mark-up, would be multiplied 6.65 times to get the dollar price. If an item be bought on a dollar basis and given the usual markup, a deduction of 85% would be made to arrive at the valun price. This percentage would be announced publicly every day so that buyers, as well as sellers, would know the differential.

What he calls the VCC Association is the proposed IVES and the same equivalent would be practiced in the proposal.

There would be no agreement among dealers to follow these price differentials; and this would not affect the scale of prices of different dealers. However, if a dealer did not follow the differential in his valun and dollar pricing, the tendency would be for buyers to purchase, at the Currency Counters, valuns or dollars whichever gave them an advantage with the merchant who had failed to follow the official differential in his pricing. This in turn would work to the disadvantage of the merchant when he came to convert his dollars or valuns, one into the other. The influence of the Valun Currency Counters would therefore be to make the differential between dollar and valun uniform in all shops, however much their price scales might vary. At the outset, the practice would be to quote prices exclusively in dollars, with the discount for valuns. As valun trading gained the ascendency the practice would probably be adopted of quoting exclusively in valuns, with the premium rate in dollars.

We have sliced right through all of this. There will be one set of exchange rates daily and everyone will follow them!

The Valun Currency Counters would be privately owned and conducted under the terms of the franchise issued by the Valun Exchange.

All places where our proposed exchanges and their branches would be set up would be private, open to members only. They would be operated similar to a franchise business. IVES would issue the franchise. That's why IVES must be organized, constituted, implemented first.

All services rendered by them would be subject to an appropriate fee which would be stipulated by the Exchange or regulated by competition.

These fees would have to be in dollars, euros, pounds, yen, rubles, etc. Perhaps each member is charged the equivalent in Valuns each year that they have to come up with in their local “public” currencies, but membership dues should be kept at all times purposely very low, like perhaps the comparable value of V1 on the date the member joins the exchange and of course any and all of THEIR money is sold for silver and gold as that is the only kind of THEIR money we will hold.

Whatever the cost to the members might be, it would be less than the cost of maintaining branch Exchanges after the manner of the present banking system with its many units and branches luxuriously equipped.

It certainly would in the beginning. As the Valun world expands, we expect that various other “private” features will appear and these could be housed in more luxurious surroundings. The chief reason this will be so though is that no exchange will ever be in the business of lending money. Riegel concludes this chapter by saying,

The checks that pass through the Exchange would be its continuous stream of income by reason of a charge on each check cleared, and this per check charge should be minimized by economies wherever possible. There is in the valun system no need to do the pretentious thing - to inspire public awe and blind confidence. There is no occasion for window dressing or display of any kind. The system is to be a matter of fact institution - serving the simple needs of exchange, reflecting the democratic control of its members, and serving them essentially as community bookkeeper.

We like this and it still fits what most people want; no need to inspire public awe and blind confidence. Oh no. We want people to go out and use what we have devised being confident about what Valuns are, what they represent and how they trade. Riegel stipulated elsewhere his initial idea for a transaction fee being 1/10th of 1% of the transaction paid for by the initiator of the transaction.

So for instance, the transaction fee for moving V100 from one account to another would be 1/10th of V1 or 10 cends, cento, fen, etc. Well, all those fees would be paid to the exchange and after a while those fees add up. The only exception we're prepared to make is in moving Valuns from a member account into V-Checks and for depositing (retiring) V-Checks. We're supposing that eliminating the fee would see more V-Checks circulate, which is the public relations piece of the Valun system. All those nicely engraved pieces of paper and pretty coins Riegel mentions will have something to do with causing attention to be paid to local areas, local businesses, perhaps local people, local musical groups, etc. all whose pictures and emblems may end up on the reverse sides of V-Checks as forms of legitimate advertising.

In all that, Riegel still didn't explain how Valuns would be issued. His explanation covered more exactly how money transfers are in fact carried out as an essentially accounting process, thereby defeating any of the arguments of “gold bugs,” etc..

So how do Valuns get issued in the proposed system?

Valuns, or in fact any other money, are worthless without people so we start there. We considered that it would take at least 40,000 people to form an exchange. All these people would have to

1) be approved by 2 existing A members 
2) have the legal right to live where they live (domicile) and 
3) be 18 years of age or older

We didn't say anything about any other consideration. If you meet these requirements, you're in as an A member. You may be charged an annual fee of the “local equivalent of 1 Valun” in your local “public” currency every year. Right now that's $2.65 so a rough equivalent of getting 40,000 members to join would be to raise $106,000 and that's just for starting. Much of the money raised would go toward providing rental space on totally private property; offices not open to the general public yet logistically convenient, equipment, etc. We're talking very spare; laptops running off the shelf operating systems and special software IVES develops to run on them to handle our accounting. Thumb drives will contain all account info and provide a means to send transactions to other exchanges. All deliveries of this sort will need to be done by hand to provide best security. All the usual data sterilization protocols will be enforced to catch and eliminate any and all interference.

Now perhaps most of those A members have jobs and work for someone who might be or might not be a member of the exchange. Of course it would be better if all A members were working for B member businesses, but in the case of public employees, that wouldn't be possible. In fact with the growth of corporate bureaucracy everywhere, it may be necessary to resort to something different; what amounts to a labour contract between an A member and their exchange such that each unit of paid term at any of these said jobs would bear some equivalent of the number of Valuns the A member wants to earn alongside their pay in dollars, euros, pounds, yen, rubles, etc.

Say someone (an A member) has a salaried position paying them $20K per year. They are usually paid by the month. They could post a valid labour contract at their local exchange whereby they agree to get paid say $10K more per year in Valuns. Except it would never be stated that way as there would be nothing on any contract specifying any payment in anything but Valuns.

So let's say we start with a Valun = $2.65 and of course $10,000 / $2.65 = V3,773.58 and that divides into 12 payments of V314.47 each month on the same day he receives payment in “public” money. At the end of the year, they are still liable for taxes on $10,000 additional income and that would have to be paid in THEIR money not ours. We would admonish all our members to do as we have suggested elsewhere; pay all that is required using THEIR money and spend your Valuns on what you can acquire with them locally among your own B member businesses. In this way you over time repay and pay off and do not acquire more of THEIR debt. That debt represents debt slavery to THEM and you want out of it. This proposal is one of the ONLY ways possible to achieve this short of violence. Notice, violence is what THEY want, so as to oppress us more. To avoid violence, we have to walk out of their oppression and organize something else. You cannot have and enjoy freedom if it isn't available to everyone else.

So then there's the purchasing power each A member gets and does NOT require to be reported to any taxing authority, as it is not income from somewhere else, but represents your own innate wealth granted you by association with others who mutually recognize this as an expression of the individual human being's inalienable right to issue money. We have stated many places on this blog that each new A member will be granted the ability to issue V200. At $2.65 per Valun, that's $560 per A member and for 40,000 A members represents $22,400,000 of purchasing power, the force in money terms for a community of this size to get an alternative monetary system up and running. But we're not finished.

There will be many people who are retired, disabled or poor among us. Each of these would also get the right to issue Valuns up to and including in fair trade value what they receive every month from some pension, social security, retirement benefits, etc. exclusive of all health and medical coverage which shall not be included. Valuns each community allows its members to issue will for the time being be determined by what each state or country considers its minimum wage in the “public” currency to be. This was explained here. If you are an indigent exchange A member in California, they will likely allow you to issue up to V7,300 per year (V608.33 a month), while in Kentucky, only V5,300 per year (V441.67 a month).  Of course the actual figures will depend on how and when any of this gets off the ground. 

Also recall that we have pretty much ascertained that money is not just issued, it also dies and therefore without replenishment economies actually die. If that replenishment must come with debt attached; usury, asking back something that was never created, the debt increases to the point where the economy is swallowed by the lenders. Then eventually the lenders are evicted from the countries that suffered them and they take their portable real estate in the form of gold and silver with them to ply their trade elsewhere. But eventually they got loose and since 1815 have been “masters of the universe” and what they want most is to stay on top from behind the curtains (until it's safe for them to emerge) and heavily police the rest of us and dumb as many of us down too so that we are incapable of ever resisting or overthrowing them. What I have dared to say openly here is that the present elites care absolutely nothing about living standards, opportunities for prosperity or any good thing for and among the people of this world. They would in fact prefer if most of us were dead. Meanwhile, most of us still long to be alive and look forward to better for ourselves, our children, grandchildren, etc. So the remainder has very much to do with our understanding of the other end of money, not just its issuance, where it begins, but with its death, where it goes out of existence.

In this we consider that with depreciation of assets, money dies never to return. The turnover of these assets for use before they are utterly scrapped results in the loss of money. Let's demonstrate with an example:

Someone buys a vehicle for $40,000
A Year later he sells the car for $35,000 - $5,000 has gone, never to return.
The new owner drives it for a few years and ends up selling it for $16,000 – That's another $19,000 gone, never to return.
The third owner of this same vehicle drives it for a while and it begins developing some issues, so he sells it for $6,000 – that's another $10,000 gone never to return.
The third owner drives it into the dirt and scraps it for $400 – that's $5,600 gone.

The process may take between 10 and 20 years. Most of us have experienced this, we've seen it happen. Most of us who drive, own used vehicles. Depending on the brand and how its made, etc. the steepest decline in money demise comes when the new vehicle is driven off the lot. Depreciation is also involved in the destruction of wealth; wealth is only wealth if it produces an income, so as assets depreciate, presumably less income is obtainable.

So, how again are Valuns issued? They are all issued by A members of each and every exchange; they are issued by the poor, etc. up to the limits set by the community and agreed upon by the IVES; they are issued through self financed labour contracts; or they may be exchanged into existence by tender of gold and silver (which each exchange will handle for members tendering local “public” currencies). It is expected that as Valuns are used to purchase assets, that in the process of depreciation, Valuns will die, same as any other money. But the replenishment of Valuns springs mostly from work and the more work you can do and get paid more for, as the saying goes, the sky is the limit. The purpose for acquiring more money is to have a longer yardstick of value measurement to be able to take possession of, to acquire, larger and more costly assets, which in turn would provide the means to an income, else they are not strictly speaking wealth, they are just stuff.

We will likely continue this discussion when we consider Riegel's PEM Chapter VII.

David Burton

Current Hypothetical Value of a Hypothetical Value Unit

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