APPENDIX
Design
Requirements for a Personal Enterprise Monetary System
FOR
THE REALIZATION of its ideal, any design for a nonpolitical,
universal monetary system must depend upon demonstrated merit in
winning participants to it from the political monetary systems and,
by the test of competition, prove itself worthy of universal
acceptance by personal enterprisers. Such a system can involve no
monopoly powers. If it does not respond to the needs and preferences
of all people, it will face competition by one or more other systems.
The
unit of such a system might be called the "valun" (value
unit), and the system the "valun system." When a valun
system develops, it will be operated through departments of existing
banks or other corporations or by individuals or groups of
individuals, capitalized or not. There will be latitude for private
initiative and freedom of participation by all classes in the
operating service as well as in the utilization of the facilities of
such a system.
Participation
will be entirely voluntary. No legislation will be enacted or
repealed. It may start in a local area, but subsequently, having no
political character and thereby being anational, it will be able to
extend anywhere and become universal, progressively displacing all
political monetary units. While there might very well be competing
systems in the beginning, sooner or later one of them likely will
become universal, as trade naturally tends to unify and adopt a
single monetary language.
Governments,
national, state and local, will participate in the use of valuns as
acceptors and transmitters, but not as issuers. The practice of legal
counterfeiting of the exchange media, now indulged by all national
governments in the political monetary system, will be impossible in a
valun system.
Although
money, insofar as it is genuine, has always sprung from personal
enterprise, the first valun system will be the first monetary system
to assert the control of money as the exclusive prerogative of its
true issuers, repudiating the idea of the state as a contributory
factor and rejecting its intervention therein. That is why the valun
concept is the first concept of money that can be rationalized.
The
lack of monetary rationale and the universal confusion on the subject
existing throughout society from the grass roots to the academies and
parliaments is due to the acceptance of a basic error, namely, that
money is a creation of the state and must have a legal tender status
and political regulation. If one accepts this false premise, only
confusion can result, as has resulted in the entire literature and
jurisprudence of money. If we reject this postulate, we free our
mental processes and can easily master the subject.
It
should not take much thought, once the proposition is posed, to
realize that money is a device of traders, that it flows out of
purchase and sale transactions, and that anyone who is not a trader
cannot qualify as a money issuer. How can a government possibly be an
exception to this rule?
Some
will answer that governments render services and thus contribute
something to the market. But is government service rendered to the
market? Is it purchaseable? True, governments render a mélange of
service and disservice, but there is no way of pricing the good and
rejecting the bad. The only way to separate service and disservice
and to evaluate the former is by the test of pricing in the free,
competitive market—by voluntary purchase. Citizens are not sold
government service; they are coerced into paying taxes, which is
merely confiscation. Money is for the voluntary exchange of goods and
services. It has no coercive element and no deceptive devices, and
therefore has no place for tribute takers, taxers and counterfeiters.
A racketeer could not justify his counterfeit money issues on the
pretext that he extorted it all for the "service" or
"protection" he rendered.
Until
some way can be found for government service to be offered on an
over-the counter basis, the citizen must bear taxes table d'hôte and
resist them as best he can. But he cannot resist or even comprehend
his taxes if government is admitted to credit in monetary exchange
and thus allowed to issue mock money into the money stream, thereby
making every merchant a surreptitious tax collector and bearing in
the eyes of the deluded citizenry the onus for higher prices through
inflation.
Tax
collection must operate outside and not within the money credit
system. Government must be obliged to get its taxes the hard
way—above board, where the citizen can be conscious of them and can
offer the appropriate resistance. We cannot govern government and
stabilize exchange until we end the political money counterfeiting
power. Counterfeit money, if the counterfeiter is active enough, can
destroy the whole social, economic and political order. Thus we come
to the first cardinal principle of a sound and honest monetary
system:
Governments,
and all others that do not buy and sell goods or services in
competitive trade, must be excluded from undertaking the money
issuing power.
Stepping
back now from the urgency of the political inflation crisis to
examine the lesser, though more frequent, private bank credit crises
known as business cycles, we inquire, how come? We find that these
crises arise by reason of a double meaning given the word dollar. By
the bank "loan" process the borrower creates checkbook
dollars that the banker agrees to convert into currency dollars on
demand, while he, the banker, is under legal restrictions in the
amount of' currency dollars he can make available. With the rise in
the number of check-book dollars, the amount of possible claims for
currency compared to the amount actually available becomes more
disparate, and with the precipitation of the crisis, the potential
claims turn into actual demands, with resulting defaults of banks and
borrowers in the downward trend of the cycle into depression.
We
need not here go into the question of what precipitates the crisis.
It is sufficient to realize that they could not be precipitated if
the word dollar in the borrower transaction had not a different
meaning from the word dollar as used in the bankers' liabilities to
their depositors. In serving the needs of the commercial community,
the banker is obliged to promise more of something than he can
possibly deliver. Like the cheating goldsmith banker who issued more
promises of gold than he could fulfill, the modern banker promises
what he does not have, not because he chooses to, but because he is
obliged to do so to fulfill his function under the political monetary
system.
The
political monetary system is thus fraught with a speculative factor
that would not exist in a true monetary system. By its elimination,
the business cycle could be eliminated. Thus we come to cardinal
principle number two of a valun system:
There
must be no distinction as to volume or interchangeability between
check valuns and currency valuns. The check issuing power and the
currency issuing power
must
be coextensive.
These
two are the only indispensable and unalterable principles in a
genuine monetary system. All else is a matter of preference to be
worked out in the crucible of practice.
Any
who accept these two cardinal principles are, regardless of their
opinion on other matters of policy, qualified to participate in the
task of projecting the valun system, for the system contemplates the
solution of all collateral questions by the infallible process of
competition among banks, which will be free to follow any preferred
policy outside the two cardinal principles above stated.
Flexibility
of policy could be provided by the simple device of requiring each
bank to adjust, to its own performance, its reserves against
defaults. Such reserve, as well as overhead expenses, would, of
course, impose a cost upon its account holders, and thus the most
successful policy would reap its competitive advantage by reason of
lower operating expenses.
For
instance, take the two questions of policy that are the subjects of
the greatest amount of controversy—the standard and the credit
base.
The
"standard " advocates argue that a monetary unit, to have
substance and win acceptance, must specify a measure of a specific
commodity deliverable on demand. The opposed group, of which the
writer is one, holds that this is entirely gratuitous. It holds that
the merit of money is that it is exchangeable for any commodity in
whatever sum the market, by competition, ordains, and that price
fixing (which is essential to the standard idea) is anathema to free
exchange.
On
the question of the credit base, the traditional school holds that
realized wealth is the proper base. Emphasis is thus put on past
performance, and hence this view is backward-looking, aristocratic
and conservative. The opposed school, to which the writer adheres,
bases credit on prospects. It believes that the purpose of money is
the generation of new wealth from human energy and that realized
wealth is no generator of money. This view is foreword-looking,
liberal, democratic and dynamic.
Here,
then, we have opposed views on two vital questions that can be
debated in theory 'til Kingdom come without a solution. If we allow
such issues to occupy our minds at this time, we merely frustrate
ourselves, whereas, if we leave them to practical test, they will be
resolved by the all-solving process of competition.
We
should remember that the valun concept supplies, for the first time
in world history, the opportunity to develop a monetary science by
purely voluntary processes. No legislation and hence no coercion is
involved. The widest latitude is given to initiative, in that any
person or group may open a valun bank and conduct it on whatever
policy seems most scientific or most popular and have the opportunity
of proving it by competition.
Likewise,
once the valun system is operating, it must itself win the
competitive test with the existing political polyglot monetary
system. If its cardinal principles be right, it or one like it must
ultimately unify all business in the world on a personal enterprise
monetary unit.
Let
us, who favor personal enterprise money, concentrate our whole
thought upon the cardinal principles of the valun system, making sure
that they are sound, and leave all else to empirical processes.
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