Wednesday, August 3, 2016

#93.2 Updating Riegel – Each Issuer's Limit - Pt. 1

Now, before getting on with the topic of this post, again I would like to lay before the public a few incontestable facts, and so a little digression -”oh dear, not another one of those”- well, we'll attempt to keep it short:

1. We originally pursued the ideas of E. C. Riegel because his observations and solution represented quite literally the only foreseeable way forward in solving an age old problem; the money problem. We started from his rough pencil sketch, and developed a proposed system described throughout this blog. Our mission from before the very beginning was to honestly help humanity from destroying itself, or more precisely from being destroyed by a few who are certainly and quite plainly nothing more than a bunch of insanely rich savage babies (just look who is running for POTUS this year). One cannot do what one wants if one is attached in any way to such as these. The attachment to THEM is through THEIR money which it has been on purpose claimed belongs to you and me when that is and has always been a deliberate lie and mass deception on the part of the people who presently operate the present machine (regime). Regime change is meaningless without replacing the money machine and forbidding forever the ways in which it operates and the ways in which it has been constructed as organizations. And THEY have most people fooled into believing that gold and silver coins would be better. Sheesh!

2. Our contention since the beginning of this blog's inception was that what we know of as money or a monetary system is in fact nothing more than an accounting machine. We infer from this assertion, and directly from it, that the circulating tokens operate best when they are least expensive (Gresham's Law in reverse, which happens to be an actual natural law). Therefore circulating precious metals coins is out. We stick with paper tokens, as nice as we may choose to make them, as these represent the outward manifestation of OUR money. When the time comes, we may have a wide enough membership that laws are repealed and coinage can become used for our smallest denominations. Using the proposed system, a cend, cento, fen, the smallest particle of our monetary system, is worth around three cents American. Our idea here is that any coins would actually be usable weights for things of more value such as precious metals coins. It would likely be based on the decimal Troy ounce system.

3. What do we say to “gold bugs?” Ask them why their gold doesn't buy as much as it did in 2011? They'll have no suitable answer. Ask them if they know for sure that a “silver certificate,” “gold certificate,” “Gold trade note,” or whatever gaudy pronouncements on these tokens proclaims, determines whether they are holding a certificate to supposed “real money” (gold and or silver usually, sometimes platinum) or whether the “backing” for this certificate hasn't already been loaned out 9 to 1 in a process that's been going on since antiquity known as fractional reserve banking? He wont know and might even be baffled by the question. Ask him how it was possible on both a gold and silver standard that banks went bust. He might not know. Our proposal is good enough that this simply doesn't happen, ever again. As long as people adhere to the basic rules, no independent exchanges should ever go down, ever. Recall though, it isn't money that has any value in itself, it's people that have value and if some of those people decide to maintain and be part of what it takes to operate OUR monetary machine, then it will continue. No exchange is ever going to be lending money to anyone. That's for individual business members to do. Finance becomes a separate business from transaction clearing. 

4. What do we say to people who dismiss “fiat money” solutions? We council them that they have been purposely misled and this propaganda has been going on from bankers since before the launching of their first central bank, the Bank of England. The fiat to issue money DOES NOT BELONG TO GOVERNMENTS. Please read Riegel on this point. But come on people, where would the natural power to issue money ultimately come from? FROM EACH ONE OF US! Therefore, whether it was by deliberate intention (and it was in part) or by accident, the fact remains that the present order has usurped the natural fiat to issue money from each one of us! Once this bridge is crossed, and that bridge burned behind you so that you never again go back across it (we're speaking about ideas, intellect and intelligence here) then we can move forward with the solution.

Now that wasn't so bad, was it? Let's take a look at Riegel's Private Enterprise Money, chapter 7: 

We come now to the crux of our problem in determining the money issuing power. Through the traditional bank credit practice, which is an outgrowth of the ancient aristocratic attitude, our minds have become habituated to attributing creditability to possession of material resources. We should be careful not to borrow mental attitudes from the autocratic political money system which we are undertaking to renounce. 

There is no psychology of grant in our system. Everything is predicated on rights and mutual interest. There is none among us who is endowed with special powers, hence there is none that can favor others. We are pursuing the ideal of a true money system because money exchange is indispensable to all of us. We are interdependent. We are interdependent because we have discovered that we can exploit ourselves fully only through others.

Didn't I say just about the same thing? We are undertaking to renounce, he says it right there, THEIR money and THEIR system. We are saying “come out of her, my people” into a true money system, which THEIRS is not. By the way, drive down every street in the civilized world and you see wires strung along everywhere. One might believe that this is the only way such things as electricity and telecommunications can be handled or dispensed. We have the same naive and ridiculous notions everywhere that never get confronted and therefore are allowed to continue leading individuals, communities, peoples, and entire nations in misleading directions. We assume much the same about money and banking issues. Frankly, most people detest money and the institutions connected with it. They know instinctively that what they are dealing in is NOT theirs, but continue believing that it is because some things have always been the way they always are and etc. etc. The next three paragraphs cover some issues we'll point out:

If we make all we consume, we must live a very low standard life.

This is the truth and the facts of life; if you want the advantages of civilization over barbarism, and are limited to literal subsistence, then you of course need no money and are limited to whole barter for anything you might think you want or need.

If we make things that others consume and others make what we consume we raise our standard of living. This requires exchange and as we have seen, money is merely a device for facilitating exchange and hence a means of exploiting our own wealth producing capacity.

Another improvement we feel absolutely necessary for all our members to get is that all true wealth must produce income and that here Riegel is probably using wealth in its usual sense as mere stuff that could possibly be sold for cash. Meanwhile the phrase, our own wealth producing capacity is far closer to our understanding of innate wealth; that which comes forth from you that produces a reward in money terms is your innate wealth.

But let us not be confused by the exchange process. It does not, or at least should not, alter the rule that we consume only what we produce and produce all we consume.

This renders the following: consuming more than one produces is only legitimately possible when one produces enough to cover the expense of one's consumption. When things get really out of whack, as they are now, whole nations can consume, while they have not produced enough to sustain the cost of their consumption. The fault is actually not among the peoples or cultures, but brought about by the bad distributions and consequent poor choices that affect more and more people adversely all traceable back to the sources of all present money.

Though each of us is but a very small part of the vast mechanism of production and perhaps apply our minds and hands directly to none of the things that we use and consume, yet all we acquire is of our own making. Regrettably, most of us have made even more than we have acquired because our unfair money system has caused others to gain some of our production through the deceptive processes of exchange.

And here is an indirect slap at the banking and finance practices of his day, which have not changed very much. He calls it “unfair,” but that's probably not the sense most on the contemporary political Left might intend it. All they'd probably like to see happen is that the present system lend out more money to more people regardless of whether they can make anything of the money lent or whether they may ever pay any of it back, with interest which was never created of course. This has been tried again and again with less than positive results.

If we make all we consume and consume all we make, does it not follow that each of us is his own customer and that a true exchange system is one that permits us to buy from ourselves everything we produce and nothing more? 

He may not have known it, but he just stated a definition of what “fair” might mean concerning a monetary system; the reason money is never unlimited to anyone is that no individual has produced unlimited production.

We're defining production one way or another by the way as work. Recall our precise definition of work? It's time requisitioned, taken out of the rest of your life to earn money to barter your existence. So literally the more you work (production), under the proposal, the more Valuns there are and therefore the more with which you can barter for your consumption. 

If I be a shoe maker and desire an automobile, I can make that automobile by making shoes and when I have made an adequate number of shoes, I should come into possession of the automobile. The transformation of the shoes into the automobile is the service that exchange renders to me, and the transformation of the automobile into shoes and other things is the way exchange serves the automobile worker. The function of exchange is to transform our production into the things we want. 

He's stated the split-barter function of money here in a different way. He seems to wrap up this reciprocity idea of a fair balance of consumption and production,

If we would be fundamental in our thinking we must conceive it not only the right but the duty of each of us to consume all we produce, or, putting it in exchange terms, we must buy all we sell. If we would sell, we must buy and, therefore, the solution of the problem of selling our services adequately is to buy them adequately, indirectly by buying the services of others. The reciprocating movement is that others buy their own services, indirectly by buying ours. To permit the natural action and reaction of exchange to bring us boundless prosperity and security, each of us must be enabled to invoke it through our inherent money issuing power. 

He grasps at it without coming to our more modern conclusions; in order for us to do all this better and more naturally, we must have our own money. More of THEIRS simply wont do. There are far too many extraneous and erroneous strings attached. We do NOT accept government sanctions for trade (you must buy this or that) as legitimate AT ALL and are evidences and instances of a tyranny everywhere they occur. Riegel continues, 

All our economic ills are traceable to the folly of believing that our buying power can be vicariously exerted, i.e., that the government and those few who have bank credit can do it for us. They can no more buy for us than they can produce for us. The wealth producing power must be coordinated with the money issuing power and reside in the same places - namely, in everyman. 

All the underlined I'd summarize as ANY of the so called “Constitutional” or “interest free greenback” solutions of Bill Still (whose work I still appreciate) and others who honestly (though mistakenly) believe that without government issuance one dispenses with civil society. As we've said now a few times, most people are fully aware of what SANITY is (though there may be occasional pockets of people who are communally INSANE by their practices) and would like to live their lives with the REASONABLE EXPECTATION of continuing peace. I believe that Riegel intended the word everyman here, so I decided to get a little more info on that word. Wikipedia had 

Everyman - In literature and drama, the term everyman has come to mean an ordinary individual, with whom the audience or reader is supposed to be able to identify easily, and who is often placed in extraordinary circumstances. 

Riegel also said and reside in the same places and here we have places where ordinary individuals are placed perhaps as in these days in extraordinary circumstances. Here we're saying that these places are to be our private exchanges and designated offices (Riegel's Valun counters). 

If exchange plays no tricks on us, all of us are working for ourselves; all of us are buying from ourselves; all of us are selling to ourselves. Now what are we buying and what are we selling? We are all buying and selling the same thing. This is human energy, mental and physical. There are infinite varieties of human energy in physical form but, basically, there is but one commodity in exchange and that is human energy. It is the only value.

So again, what we have said all along is that without people, nothing that is said to exist can possibly have any value, therefore no THING deserves to be the basis for value other than ourselves. This is another fundamental understanding of what we call OUR legitimate fiat to issue money. What Riegel calls Labour we call work but they are the same thing.

Others have comprehended this and from this premise - that all value is labor, and that money is based on value - have reached the conclusion that money must be based on labor, and rightly so. The fatal error, however, that labor money planners have made is that they set a measure of labor, such as an hour, as a unit of value. This destroys the entire function of exchange, which is to evaluate labor. When exchange is not free to evaluate, it is impeded, and when exchange is impeded, production is retarded.

There are these days many hours based complementary monetary systems afloat. Some have managed to stay viable longer than others. That most are directly based on their local “public” currencies rather than to another independent standard, is also a detriment. His critique may explain why such systems are mere playthings tolerated by the powers that be because they know they are mere playthings. The proposal of this blog is entirely different. It strikes at most of the roots of the present deformed order. Whereas the present complementary money systems, especially those based on hours, never really pose any serious competition to the present system, this proposal does; we intend for OUR money to survive theirs and our network and systems and people to survive thrive and prosper after THEIRS is long gone. This is something we decide to do not just for ourselves, but for our children and grandchildren.

While it is true that labor, mental and physical, is the only value – and therefore the sole commodity that passes through exchange - it does not follow that labor is uniformly valuable. To state that all value is made up of labor, is not to state that all labor is equally valuable or even that all labor is valuable. Labor may be wasted; it may be so unintelligently applied that it is worthless.

How many instances do we see of this everywhere today? How much of this unintelligently applied and worthless labour is actually encouraged by the present order?

In the many efforts to set up a labor money system, we see how logic based on a sound premise has been frustrated by the old habit of undertaking to establish a fixed unit of value for money. This inability to comprehend the abstract value unit which our system comprehends - has been the undoing of all money planners of the past. In truth, all money systems that have existed, and all that can exist, are labor money systems because there is nothing else upon which a money system can be based, since it is the sole value. But a money system can, and all thus far have, distorted the exchange process of evaluating labor to the prejudice of the many and the advantage of the few.

and we might add that therefore and isn't it obvious? that most of those with “more money than God” are “the few” spoken of here and have theirs, and we do not want theirs, far more than most everyone else in society. Theirs has been the distorting of the exchange process of evaluating labour whereby some people by flicking a few switches, making a few orders, etc. can make “on paper” instant profits of many tens of thousands of dollars, while someone with as much natural intelligence, spends the same time scrubbing floors and cleaning houses to earn meager pay. The general population is growing quite disgusted by this disparity. For a few with nothing particularly special about them, sorry, to have way more than most people for no apparent reason but that those with the money to bestow have deemed them worthy, is frankly a tyranny. Do you want out? Where's your money?

We are all laborers and therefore fountains of wealth [innate wealth], in that we emit human energy, but we must direct that energy the way our fellow laborers would like it; and in the measure in which we respond to this demand will our energy be valued - and not by the time we have consumed in projecting it, nor by the sweat and toil that we have sacrificed. In turn, our fellow exchange participants must project their energies to our liking. These processes of projecting and evaluating energy are the function of exchange and, after evaluation has been determined, money expresses the evaluation; but money, if it is true, will have no influence whatever in determining the value. Money is not a measure of value; it is a method of stating a value determined by exchange.

This is really boiler-plate for the foregoing. But note the summary: he would prefer us NOT to confuse two ideas, the money as measure of value idea with the METHOD of stating a value determined in exchange idea. We prefer considering money as a value yardstick with “whatever it takes” in units of measure to “state a value determined by exchange” as long as that yardstick needs to be to purchase or procure whatever it is that is the value measured.

He means to say this in order to get out of our minds, remove from contemporary thinking, any ideas associated with “the intrinsic value of money” baloney. Exchange is always barter. Money merely splits that barter so that each participant can “buy from himself” what he/she needs. It's either barter or it's split barter.

If I use gold or silver it's barter and who determines the current trading capacity of a troy ounce of gold bullion or any of its subdivisions? Is it you or me? No. So this “solution” is again a FALSE and a misleading idiosyncratic mental contrivance from our ancient past which should be resoundingly discarded.

Likewise, and I want this heard for exactly what I say, ANY so called “securities investment,” especially when thought of as something to have when there is “blood in the streets” is ridiculous. I don't care whether one man made millions doing this, it doesn't mean whole herds of people (sorry, but that is appropriate too) will ever become rich by doing so. There might not be any securities exchanges in the future whereby to trade for whatever passes for money when that time comes. So what is it? It's a typical con by the “market makers” for various securities offerings to find dupes who will pay money for them, simple as that. Sell with fear and greed and collect whether up or down. Wonderful, isn't it? Some make their livings -barter for this innate wealth of theirs- to do these kinds of things. Is it productive? Is it anything needful? Does it accomplish anything? It does actually. It creates more economic black holes that are worth (on paper) far more than any income they are capable of producing.

The United States has many centers we call cities, but three of them, New York, Los Angeles and Washington are chiefly given over to trafficking in “produce” of questionable value. A fourth Boston, also peddles something increasingly not worth what most pay for it. We could similarly consider the various centers around the world as similar to these.

What did the centers used to look like? They were productive. They made things, and some still do, places in Germany and China for instance. Within any one city there were redundancies, there were competing products, there was nothing built that couldn't be readily sold, so economies of scale were preserved.

One of the big problems with the present system is that it is NOT natural. Since the money did NOT originate from someone actually doing something, there is misallocation all over the place. This causes nothing but bubbles; fake economies generated by injections of counterfeit money (all government issued or bank issued money is counterfeit according to Riegel and accordingly to us). Our solution is natural. I merged the two following paragraphs:

The ideal we are striving for, therefore, is to keep money neutral in the exchange process; and to do this we must make it available to anyone who wishes to utilize it within certain bounds. These bounds are not easy to determine. The principle can, however, be simply stated thus: Every person or corporation is entitled to create as much money – by buying, as he or it is able to redeem - by selling.

We accept this but make the following observations and changes:

A corporation or “body” may be “private” or “public.” Private corporations have owners, have partners, have general partners and limited partners. Public corporations sell shares to the public to raise money and are hence “owned” by absentee stockholders who have no stake in the business other than its revenues and profit margins. They have the freedom to pull out of said bodies whenever they feel like it by selling their shares. We believe that private corporations are suitable as candidates for B members with the following absolute requirements; all owners, partners, including all limited partners must be A members of the same exchange. The B member business will get an account and each of the A members will have accounts. Public corporations we regard as dangerous and illegitimate and therefore they are forbidden membership; its like saying that some design is of such a nature that it would disrupt and corrupt our attempt at a better system. They are literally economic dinosaurs fitted ultimately for extinction.

As we have pointed out, each of us is basically his own supplier and his own customer. The exchange process is in fact a shuttle movement. The shuttle goes from us laden with our energy and returns it to us transformed into the energy of others. Or it comes to us first and we return it. The movement is initiated by money power; and whoever lacks money power is unable to start the shuttle. An economy that restricts its shuttle starters, limits its productivity. The power to start the shuttle is really the power to buy from one's self, i.e., the power to create demand for one's own services. A true money system must make this power available to all.

Therefore as individual human beings, if you are able to abide by our simple requirements, you are eligible for A membership. Your labor contracts, wherein you simultaneously work for Valuns as you earn dollars, euros, pounds, yen, rubles, etc. is going to be with the exchange community instead of your corporation or state authority. You would be responsible to collect dollars and pay all taxes, including those associated with your Valuns. We expect by far more Valuns will enter the system this way than any other way, but more would be done if paid in Valuns and enough dollars, euros, pounds, yen, rubles, etc. to pay taxes. You "pay unto Caesar what is Caesar's" with THEIR money, including all debt in their money, and spend your Valuns on the rest, from sources that will spring up to take those Valuns which are designed to preserve their purchasing power from the outset. Riegel continues,

While the power to buy induces demand to sell, it does not follow that this reciprocal invariably reacts on a particular buyer, for he may not have the particular value for which a demand has been created.

You may be the best at a particular skill which has limited or no use because it has been superseded by newer (not necessarily better) technology, or application.

Therefore, we cannot solve the economic problem by merely providing money power and multiplying shuttle-starters. If the problem were as simple as this, we could establish the money creating power for everyone without limit on the assumption that selling would automatically balance buying in each case. Buying does create demand that reacts on some seller, but not necessarily on the one who created the demand. There is, however, no way of determining in advance whether a particular buyer may create demand for his own wares or services. Since this is so, it is obvious that exchange can operate only on a trial and error basis. The problem we must solve is how large a margin of possible error shall be alloted to each member of the Valun Exchange.

We sort of solved this issue by considering that the various states already decide what a minimum wage job is and therefore there are differences based entirely on location. It is usually more expensive to live in California, New York, Massachusetts, etc. than it is to live in Mississippi or Texas. We saw no reason why not to accept these as comparable minimums for the amount of Valuns we allow the poor to issue. We reason as follows:

1) The poor must spend everything therefore their money goes to the most productive.
2) Having too many people spending without enough people producing produces imbalances such as are occurring everywhere in the known world. If you have a few “black holes” which have solved the production problem such that they can afford to park unsold vehicles in parking lots that go on for several square miles in countries such as the UK and USA, then what's the problem? Too much was produced and anything over produced was and is a waste of time, effort and resources. Not enough people have what it takes to afford one of these vehicles so therefore they are kept -why aren't they destroyed? Because that too is an unpaid for expense- from the market and only released when and if shortages of parts, assemblies or whole vehicles are required, usually through insurance claims against accidents, etc. 

Some critics have held that too much fiat money entering a market at once causes instant inflation, but NOT ALL MONEY PARTICIPATES IN EVERY SALE so therefore this explanation does not represent the entire story. We said, and Riegel had an example, that prices for anything in Valuns were initially really only what they are when applying the dollar (or whatever local “public” currency) to Valun conversion:

For V1 = $2.65

1 lb ground beef (regular) = $3.73 = V1.41  
1 gallon gasoline (regular) = $2.36 = V .89 (89 cend) or between V½ and V1
1 lb beef steak (most regular cuts) = $5.73 = V2.16
1 lb bacon = $5.37 = V2.03
1 dozen large eggs = $1.50 = V .57 (57 cend) or half a Valun.

Similar data can be obtained from the usual public sources and of course prices will vary form place to place.

The best that we can do is to set up a policy subject to amendment as experience may dictate. While there is possibility of error this should not intimidate us, because greater harm can follow from erring on the conservative side. Exchange must not be impeded even though some exchanges fail to realize their ideal. It is better to allot too much money power than too little - because it is impossible for successful exchange operators to willfully abuse this power; while it is possible to starve potentially successful operators. 

Therefore, as long as anyone meets the criteria they are in as A members and allowed this minimal money issue for their subsistence or “natural socialism” for as long as needed, but as more Valuns appear and are traded, some of these poor among us may end up actually working their way out of poverty. We know of no other system capable of offering as much opportunity as this.

With any other system, one is faced with dealing with special interests, special people, special instances where someone's monopoly special interest must be considered, etc. because there are loans outstanding that might be threatened if business were slackened, etc. There is always more milking of the poor by the rich in these schemes and they all pretty much suck. Riegel continues,

To illustrate: Suppose a member has a debit power of 10,000 valuns, i.e., has the power to overdraw his account to the extent of 10,000 valuns. Assume that he has drawn down for his buying to the extent of 5,000 valuns when returns began coming in from sales; and these current income credits on his account then equaled or exceeded his current expenditures. It would be impossible for him to create more valuns, because they could be created only by diminishment of his income - since the income would cancel valuns as fast or faster than he could create them. Money income destroys money creating power, as money can spring only from a debit balance. Only the moneyless can create money.

Riegel is pointing out a few things here. We'll start from the top. He refers to a poor A member with a debit power of 10,000 valuns. We would approximate this by saying that a poor A member had been allowed to issue V10,000, probably by the month too, so this would amount to V833.33 per month. This member spends down to V5,000 before his sales (see he has something going) are equal to or exceed his expenditures.

Let's say he has now an additional V1,000 from sales. That's not enough. He has to equal or exceed what he has spent, V5,000, so therefore he needs sales of at least V5,000 to clear his issue. So this A member is going to have to reach V20,000 (V10,000 from revenue and V10,000 from his own money issue) before he is profitable and can have his right to issue more “free” Valuns curtailed. This follows the replacement rule in merchandising inventory; your sales price must cover the replacement cost of inventory. The larger the item, the less margin. This is just to indicate what it takes to be “on one's feet” financially. We aren't concerned or interested really in anything THEIR systems may offer or FORCE people to accept. We must devise a monetary system that is fair, just, and correct so that human action thereafter determines the course of events.

Now the following will be instructive,

It would be impossible for him [the poor A member] to create more valuns, because they could be created only by diminishment of his income - since the income would cancel valuns as fast or faster than he could create them. Money income destroys money creating power, as money can spring only from a debit balance. Only the moneyless can create money.

Haven't we said all along that ALL money is a representation of debt? Haven't we also said that everything is still barter? Haven't we also said that no barter transaction is settled until it is settled in goods and services, NOT money? Haven't we also pretty much said that economics is bunk but accounting essential? We're about to let another cat loose.

Thus, the Valuns created by an indigent A member are what would normally be considered an overdraft of an account or a negative balance; a debt. It is however a different question to ask how many Valuns an indigent A member gets to create vs. how many Valuns does it take the indigent A member to earn enough to cancel his right of issue. It could be a 1 for 1 consideration, but we don't want that, and this is why: we know that the poor are often those who have not worked for a while or maybe ever and may require getting back into earning Valuns (or any money) slowly. We are prepared to advocate therefore a “sliding scale” of our own devising which shall make getting out of poverty easier.

The money issuance allowed all A members is based on whether they have money from elsewhere covering their subsistence. If I ask someone how much per month do they get in any currency, I can then usually come up with a comparable figure in Valuns. If I take the hourly pay scale of minimum wages for each state and determine what that is in Valuns per month, and the figure the A member gives me is higher, I just deduct the minimum for what he tells me he's earning and if higher, he has no need to issue more Valuns than he is earning by working. Here's an example:

Let's say V1 = $2.65. An A member, Tom, tells me he's getting $16/hr and he lives in New York. Tom's rough pay is $32,000, or for our purposes, $2,666.67 a month. Maybe as much as a third of that Tom never sees, as they go to paying taxes. So for New York, let's say the minimum wage is $9 which gives a yearly income of $18,000 and a per month income of $1,500. That would be at or near indigence for any A member living in New York. So Tom is clearly over the limit and doesn't get to issue Valuns for being poor.

But since Tom is already earning Valuns along with his regular pay in dollars, he's decided he can afford the extra taxes for V5,000 or $13,250 per year and even though Tom's employer is not a B member, he can still do this, he earns V416.67 a month. Tom spends his Valuns on what he needs from other members of his local exchange and pays his dollars for all those things needing payment in dollars. He also saves more dollars to pay the extra taxes he anticipates on his Valuns.

Tom has figured out a way to give himself a $13,250 raise without asking a dime more from his employer. Listen up, people! The reason things don't get done and economies don't move is due to lack of money paid for work done. Riegel was writing in the late 1940's and early 1950's and he saw even back then that labour was universally underpaid. Tom has found a way to increase his yearly income from $32,000 to $48,000 and it cost society little or nothing and in so doing Tom actually contributes to spurring on his local economy, so everyone lives better, as does Tom.

Oh, and one more thing before continuing, Riegel says, money income destroys money creating power. We certainly don't want his usage misunderstood. We think destroys a little extreme, we prefer cancels or nullifies instead. It's simple accounting; if your money issuing power is based on a community determined (through contract of course) overdraft, then you are in negative territory until such time as you can buy yourself a job or find another way to earn Valuns. Wealth is still that which produces income and any and all income from legitimate and productive goods and services sources is good and positive and leads to positive balances and better living conditions.

The normal experience of business is that income and outgo keep approximately abreast of each other; and our purpose is merely to provide a margin of discrepancy. In some industries this is larger than others, due to the length of their turnovers. Some industries, particularly the farming industry, must expend for a long period before returns come in. Others - for instance, the retail grocery business - have a lag of only one to two weeks between outgo and income.

Where this paragraph has particular significance to us relates to our credit contract intentions.

Credit contracts are of course the basis for our finance structures and they rely on various ways to prevent uncreated money being asked back on borrowed money as well as forbidding anyone to lend money they do not have. Mostly if you would borrow money, there would be a schedule appropriate to your business as Riegel describes AND you would be required to pay the cost of borrowing any Valuns up front. Let's give a quick example:

It's February. Jack is a farmer A member in Texas. He has only V250 on his personal account and the same for all the other accounts but has V650 in his farm account. His farm is a B member, as Jack, his wife and four sons work the farm with him, so his farm has an account. They are all A members with their own accounts too. He operates from mid April through mid October and requires financing to handle expenses through the season before he reaps the harvest in October and gets paid for his crop. Let's say his crop is expected to gross $75,000 but he needs $30,000 up front to get it going and another $10,000 by mid season. Has Jack any dollars? Well yes, he has maybe $40,000. So let's turn this into Valuns and see what's what:

Again at V1 = $2.65, Jack's crop is potentially worth V28,301.89. His up front requirement, V11,320.75 and he needs an additional V3,773.58. He decides he can spare $5,000 but still needs the $25,000 (V9,433.96) to begin. Meanwhile Jack has listed the things he needs and the Valuns required at his local exchange or on line where other exchange members can see his requests.

Jack gets fulfillments of V5,000 and must pay up front the cost of a 7 month contract or bill (others call debt obligations of this kind a note even if it is less than a year, but we wont). Let's say it's 10% or V500. V500 = $1,325. Wyatt, the financier A member, contacted Jack and Jack whips out the dollars and gives them to the financier. Wyatt says, “no Jack, I need Valuns.” Jack goes to the exchange and whips out his $1,325 and hands it to the cashier and he gives Jack 10 V50 V-Checks. The $1,325 goes to buy gold or silver at whatever THEY say it is worth and that goes into the IE's vault. IE cashiers will normally throw all that “public” money into canvas sacks and deliver it to the precious metals dealer (also a B member) right after closing on each business day. So Wyatt has his Valuns and writes a check or calls a cashier or texts him over an app, it could be done a number of ways, to debit his business account V5,000 and credit Jack's B member farm account V5,000. Full payment is expected by November 1st.

Now it's mid season and Jack needs another V3,775. Wyatt is willing to lend this amount to him as long as he pays the rental fee up front (V378) and Jack agrees to pay the rest also on November 1st. Jack has the Valuns this time and writes Wyatt a check on his B member account for V378.

At the end of the season Jack's crop gets harvested and sold for $68,000 or V25,660.38. Jack pays back his bill with Wyatt of V8,775 (earns points on his membership status for completing a contract) and retains V16,885.38 = $44,746.26. Now does Jack owe taxes that have to come out of this? Probably. He's decided nevertheless to slowly build the balances in his Valun accounts as these are his family lifeboats. Jack has plans for his sons and wants to help them get established and has learned that “the only way to save money is to save money” and has taken to saving as much as he can. Meanwhile he pays off all that is required in dollars and spends his Valuns on local food and entertainment as well as other things his wife and sons are interested in. When your exchange membership is high enough, there's bound to be quite a few that are ready and willing to accept your Valuns as they will be earning theirs as well.

Now continuing with Riegel,

A study of the turnover of various industries should be made as a guide for variations from a general rule. As a general rule for the initiating of trading on the Valun Exchange, we propose the following.

Each employer would list with the Exchange the names of employees who are members of the Exchange - together with the amount of salary payable to each over a three months period, including officers and owners.

Under the proposal, A members may work for B members (encouraged) or they may work for other businesses or state authorities that cannot be members. Where B members are the employer, their A member employees are self-financing; they issue/pay forward their pay in Valuns to the B member. We would at present start with six month contracts rather than 3 month ones. All of these contracts could be extended, changed or terminated. These are what we call Labour Contracts and they are one of the ways Valuns are issued. When you buy a job, the Valuns were issued and paid to your employer and paid back to you on successive pay days for work you did. Since the money you issued bought your time and paid for it, those Valuns represent a closed monetary circle and cannot contribute to inflation; the time you worked backed the Valuns you issued. This is the only way one can say that one is paid in their own money; they were never bought. The decision to accept your employment offer on the terms desired was also determined by the employer based on his cost basis for eventual products for sale to the public or to members of our private exchanges.

The amounts, so stated, to constitute the debit limit of each such employee.

Stated again, this debt limit or limit to the amount of Valuns created is covered in the proposed Labor Contracts.

Each such employee-member to be authorized to write checks up to the limit stated. The amount of the stipulated salary to be credited to the Exchange account of the employee as earned and simultaneously debited to the employer's Exchange payroll account.

It is this B member's exchange payroll account that is credited with the entire sum of the Valuns on the employee's contract, thence to be paid back as stipulated on the contract. The employee's debit is accounted for on the contract rather than on the employee's exchange account. As the terms of the contract are fulfilled, the debit is canceled.

Checks written by employees to be debited to their accounts. No further payroll process would be necessary. Thus the money creating would begin by employees writing checks for their needs. If employee A had a salary of 100 valuns a month, his debit power would be 300 valuns. In other words, he could overdraw his account up to 300 valuns.

In our proposal, as part of the self-financing of labour, we have granted the interest free float to the B members. The A member gets what his/her contract says they get paid in Valuns every stipulated pay period until the contract expires. New contracts may be for longer periods and probably more Valuns too. Riegel goes on to say,

The employer would have two accounts, a payroll account and a commercial account. His payroll account to have a debit limit equal to his total payroll for three months. His commercial account to have a debit limit of 1/2 this amount or as much more as the class of his industry entitles him to as determined by the industry study of turnover.

In general we like the idea of two accounts per B member, a labour/payroll account and a regular commercial account. But his were rough pencil strokes. We'd say that all Labour Contracts within the VEN would involve accounting between an employee's A member account and his/her employer's B member payroll account. The payroll account would get the float from the employee's first day of work stipulated on the contract for the full amount on that contract. It could be used by the employer up until he has to pay his employee from that same account. It's up to each B member business to determine if that's feasible. Increasingly it will be resorted to.

To include all members in debit power, thus providing for those who are on no payroll, a minimum of, say 100 valuns might be provided for every member. 

We raised this to V200 and that's where it's likely to remain. But we want to say something here about two other classes of people, those who work for a non-member concern and those who are homeless.

If you work for someone other than a B member, you can still earn Valuns by resorting to a Labour Contract with your community through your local IE. Here's how it works: you bring in your pay stub to the IE and the clerk makes out a quick Labour Contract for six months to begin with, which pays you Valuns on the same day you are paid in whatever of THEIR money you are paid in. What you've done is used your regular pay to give yourself a raise. You may not want to earn the same number of Valuns as you are paid in THEIR money because of the potential tax implications; that would be doubling your income. So let's say you earn $25,000/yr. If V1 = $2.65 that's V9,433.96 and maybe that's too much of a raise, so your contract stipulates say V6,000 = $15,900 or an additional V500 per month. You've increased your income to $40,900 without having to bother anyone who would be bothered. The more people who do this, the better.

Now the homeless have a problem, where do they live? They live where they are. Are they willing to settle anywhere? Can they fulfill other requirements outside of our organizations that would pose no problem for us? We do not want to include undocumented aliens for instance among our members. If they have home countries, the same system we advocate would work there but produce results based on where they are, certain economic advantages associated with places and climates, etc. and what they decide to do for themselves. But regardless, most homeless who are not obviously INSANE and are otherwise living with a REASONABLE EXPECTATION of continuing peace, could probably arrange to join us. They'd most likely start at subsistence because most of these people have no money of any kind. I believe what's reasonable above all else is for any and all to show a willingness to work at something for pay, because Valuns are worth working for. The more that use them the better too. That's how money obtains its currency.

These debit limits would not be loans, no instruments would be executed for them and the actual debit would be the amount of overdrafts on the account.

Updating: of course no loans are in force. When your monthly income falls below subsistence you can issue Valuns from what Riegel considers your overdraft. But having Labour contracts in place achieves something Riegel perhaps didn't consider, after all it's kind of an added feature. If we adopt the self financing of labour and contracts that go with it, there is something often called goodwill that is built up; someone with more completed contracts may get to do more, borrow more, etc. than someone who hasn't. Also we have a slightly different idea concerning how the accounting records would be set up so as to distinguish between money that each member creates from out of themselves vs. any money that they might receive as income. These distinctions matter, certainly as regards taxes. Just as borrowed money cannot be taxed, so too is any means of exchange that does not fall into an income category not taxed.

There would be no term to them [debit limits]; and they might be maintained indefinitely. The reason for this is that they constitute the money supply and are necessary to exchange, and there is no reason for making them rotating. Debit balances on some accounts of course imply credit balances on others.

Of course, but again, we pretty much allow the state and public law sectors to determine what constitutes indigence in terms of THEIR money and begin by paralleling it in ours.

Therefore it would be impossible for all members to have debit balances at the same time. Some might start their check writing against a credit balance and never have a debit balance and some might remain chronically on the debit side. they are poor, indigent, disabled, attempting not to be homeless, etc. But here's the cat out of the bag that's different from just considering one account balance as fit for the examples.

We would advocate on each A member's account three account balances as follows: 1) a positive balance representing the Valuns an A member is permitted to issue, 2) a regular balance representing all income to the account and 3) an escrow account to handle all recurring credit contract payments. This accomplishes separating the Valuns which are income from those which are not.

We said that there would be a limit to the number of Valuns an A member gets to issue and this would be related to their income from contracts. It would be determined month by month. That's one reason we need contracts, the other reasons are that more people need to gain awareness of how fulfilling contracts improves one's reputation in a community. There would be a point system for each fulfilled contract. We'd say that contractual agreements between people strengthen communities and improve the character of individual people too.

Under the above proposal, exchange would begin by consumers purchasing at retail, and by employers purchasing at wholesale. At the end of the initial 3 months period, the employer would find himself with a debit to his payroll account equal to the total earnings of his employees during that period. This would be the limit of the payroll account. For his employees to continue their drafts, he would have to draw on his commercial account - in which would have been deposited all his receipts, and in which he would have a debit power of 1/2 his three months payroll.

This was all right as a first draft proposal, but we would prefer that once the first six month Labour Contracts run, that they are either renewed or replaced or that perhaps the employee finds by then something else and can select another opportunity that he/she can again pay in advance for; literally buying their own employment. One very big change is that under the proposal, labour costs are no longer part of the employer's financial consideration; no one need ever again to borrow money to pay somebody to do something, they will simply set a price for the labour and if accepted, the money will be credited to the employer's payroll account until it is paid back to the employee. In fact the B member account would also have 3 balances, the first would be a positive balance reflecting the company's retained earnings, the second would be a regular commercial balance and the third an escrow account that would be the payroll balance. If we do some things right we may be able to eliminate numbers of accounts.

This is a lengthy chapter, to be continued.

David Burton 

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