VI
HOW
THE MONEY IS ISSUED
CHECKS
AND CURRENCY AND THEIR BASIS
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.
While
all the traders in the Exchange hold values in trust, none knows who
actually may present an ownership claim therefor by the tender of
money, and whether there is warrant for such tender. Therefore there
must be a central bookkeeper, with an all-seeing eye, that keeps
account of who holds values and who holds claims thereto. Some means
of conveying this information to and from the central bookkeeper must
be available.
For
the purpose of fixing in our minds the fact that money exchange is
accountancy and that no value attaches to the money instruments, let
us assume that the central bookkeeper operates by telephone, without
money instruments. A telephones the central office and states that B
has ordered some merchandise at a given money price and asks whether
B's account will permit the charge. On being assured that it will,
the goods are shipped and the central bookkeeper debits B's account
and credits A's. Thus a perfect money transaction has been
consummated because values were stated in terms of a money unit and
value has moved only one way, and from which there has arisen a debit
and a credit warranted by the rules of the money system. Yet no
instruments have been issued, and thus there is nothing material upon
which the mind can fix a value or attach a superstitious power. This
demonstrates that money is first of all a concept in accountancy and
that it may be expressed verbally. We may go further and assume that,
in confirmation of the above transaction between A and B, B sent to
the central bookkeeper a duplicate of A's order. Still we think of
the transaction as a simple bookkeeping transaction and there is no
superstition
attaching to the duplicate order.
Let
us hold to this bookkeeping concept and assume that, with the order
for the goods, B sent via A an order known as a check directing the
central bookkeeper, to debit his account and credit A's account, and
that A sent this to the central bookkeeper instead of a duplicate
order. In spite of the fact that the check is known as a money
instrument, it is still nothing but a bookkeeping memorandum - and is
not in the least mystifying.
Now
we will assume that B calls up the bookkeeper and says that it is
inconvenient to write checks for petty transactions; and asks if the
bookkeeper hasn't some plan for obviating check writing. The
bookkeeper says, "yes; I have some bills, in different
denominations and coins, that require no signature and are good in
anybody's hands." B asks how he can get them. The bookkeeper
says: "send me your check for the amount you want and I'll give
them to you. I will debit your account for your check in the regular
way." Now, because nicely engraved pieces of paper and pretty
coins meet the eye, we are in the zone where the greatest
superstition arises. To most persons these instruments are money, and
nothing else is money. Yet these are but bookkeeping instruments like
the check and the duplicate order. In essence, they are the same, but
the check is better suited to the purpose visualized than is the
duplicate order, and the currency is better suited than is the check
for certain purposes. 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.
How
does the currency spring into existence? As we have seen, someone had
to order and authorize it. The bookkeeping method is to set up a
special currency authority who has caused to be fabricated the pieces
of paper and coins. When a check is written for it, the amount of the
check is debited to the account of the check writer who receives the
currency and the same amount is credited to the currency authority.
Thus the currency is just as much a creation of the check writer as
is the check which requisitioned it. It becomes the equivalent of a
certified check payable to bearer. No mystery, no magic, nothing
awesome. 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.
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.
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 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."
The currency bills need but carry the word VALUN and the
denomination. Coins need carry only the word VALUN with the fraction
they represent such as 1/100, 1/20, 1/10, 1/4, 1/2. The name of the
1/100 would be cend, (Esperanto) the five cend piece might be called
the quin, the ten cend piece, the tenth. The material from which the
coins would be stamped should be the most inexpensive that would
serve the purposes of wear and weight. Some concession might be made
to the vending machine industry.
To
enable the valun system to render the check clearing service rendered
by banks - without their luxurious quarters and extensive units and
branches - it is proposed that only one Exchange be set up for each
state; in any satisfactory quarters, even if it be in an industrial
section. This plan precludes the necessity for members to visit the
Exchange, and relies entirely upon the mails for conveying deposits
and returning vouchers. Such a plan must provide the means for
drawing and depositing currency; and to serve this need it is
proposed to have Valun Currency Counters in business neighborhoods.
NEIGHBORHOOD
CURRENCY COUNTERS
A
Valun Currency Counter would be authorized by a franchise issued by
the Valun Exchange to an applicant member located in a business
neighborhood where there might be sufficient demand to justify. The
primary function of the V.C.C. would be to accept deposits of
currency or checks for currency on demand. 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.
The
secondary function of the V. C. C. dealers would be to buy valuns for
dollars, or dollars for valuns, at the current rate of exchange.
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.
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.
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.
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.
The
Valun Currency Counters would be privately owned and conducted
under
the terms of the franchise issued by the Valun Exchange. All services
rendered by them would be subject to an appropriate fee which would
be stipulated by the Exchange or regulated by competition. 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.
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.
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