Message-ID: <005a01c31e15$cd066240$4201bf3f@v4dq1>
From: "Thomas H. Greco, Jr." <circ2@mindspring.com>
To: "Zube John" <jzube@acenet.com.au>
Subject: Fw: Riegel precis
Date: Mon, 19 May 2003 07:39:04 -0700
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----- Original Message -----
From: Thomas H. Greco, Jr.
To: IJCCR ; Just_trade_discussion@yahoogroups.com
Cc: Aldana Mike ; Keesler Mike ; Tennant Kenneth ; Flo Gary ; Smith Jeff
Sent: Monday, May 19, 2003 7:36 AM
Subject: Riegel precis


Here, fyi, is a précis of Riegel's Flight From Inflation. I've also appended
it as a Word attachment.
I think it captures the most important points and shows the depth of
Riegel's insights about the nature of money and its liberation.
All of Riegel's most important works will soon be available at
ReinventingMoney.com.

I encourage everyone to read his Private Enterprise Money now at
http://www.mind-trek.com/treatise/ecr-pem/index.htm.

Cheers,
Tom


FLIGHT FROM INFLATION: The Monetary Alternative

By E. C. RIEGEL

An annotated précis prepared by Thomas H. Greco, Jr. May 18, 2003

Shortly after reading this astounding work in 1987, I prepared a précis of
it, extracting the most provocative statements and evident truths for the
benefit of a small circle of correspondents. This précis was lost to me
until a recent move caused a hard copy to surface. Since two or three
subsequent computer upgrades have caused the original digital file to
disappear, I have undertaken to repeat my earlier effort for the benefit of
an ever growing circle of monetary freedom advocates and exchange
innovators. Now that the entire volume of Flight has been digitized, it will
be much more accessible and easier to extract. In the following, all of
Riegel's words are in regular type, with my comments being in italics and
enclosed in square brackets. I have bolded phrases that I think merit
particular attention, and have added some topical headings that may or may
not correspond to the headings in the book. Page numbers, where given, refer
to the page in the bound volume published by Spencer MacCallum, not the
digital file. - Thomas H. Greco, Jr. May 18, 2003

Introduction

THIS BOOK PRESENTS a new concept of money, one which promises greater
freedom and a broader base for democracy. It points up the futility of the
political ballot-and the facility of the monetary 'ballot'-for the
attainment of human aspirations. It elucidates an evolution that has
progressed unobserved since the inception of monetary media and that is now
coming to an end in what appears, on the surface, to be a world calamity.

This book is the first to depart from the traditional concept of money as an
instrument of the state. It is the first to propose that money and state be
separate.

[Since the 1940's, when these words were written, others, even a few
academic economists, have begun to call for the separation of money and
state. Yet, the masses of people remain ignorant and enthralled by a power
they do not understand, a power that is at once political, as well as
economic. The global political monetary regime has been the primary
instrument by which power and wealth have become ever more concentrated in
fewer hands, and democracy and freedom have been progressively eroded. Its
inherent flaws and dysfunctions are responsible for enormous suffering, and
the calamity of which Riegel spoke is upon us. Riegel's insights into the
nature and mechanisms of money go a long way toward illuminating the path
toward peace and freedom. Let us hope that they can be quickly implemented
before world despotism becomes total.]


The Nature of Money

The essential quality of money, however, is its promise to deliver value in
any commodity or service at the choice of the holder. p. 14.

Unlike a dollar bill or a dollar check, for example, a silver dollar is not
wholly money. The former are complete split-barter instruments, while the
silver dollar is a qualified split-barter instrument, in that some value is
conveyed with the promise. To that extent it is not money. If a silver
dollar contains fifty cents worth of silver, its transference is half a
monetary transaction and half a barter transaction. pp. 14-15.

A would-be money issuer must, in exchange for the goods or services he buys
from the market, place goods or services on the market. In this simple rule
of equity lies the essence of money.

... it is apparent that the buyer who issued the monetary instrument to the
seller has made a commitment to the community that is that he, in his turn,
will engage in business, i.e. will bid for money by offering his own goods
and services in the open market. In this competitive situation, he redeems
his original issue through the sale of his goods and services. Thus money is
actually backed by the value surrendered by the seller and potentially
backed by a value in the possession of the next seller. p. 15

...two factors are necessary to money creation: a buyer, who issues it, and
a seller, who accepts it. Since the seller expects, in turn, to reissue the
money to some seller, it will be seen that money springs from mutual
interest and cooperative action among traders, and not from authority.

... money is an accounting system,.. p. 16.

... the basis of money is a pledge to surrender value on demand - to offer
goods or services in the market at competitive or market price and, thereby,
to give value when money is tendered. p. 17.

Money is created by the process of incurring a debit and is destroyed by the
process of offsetting a debit.

The volume of money extant, therefore, has no relation to the volume of
business transacted in its name. The volume of money is determined by the
amount of deferred spending, or "savings."

... money is but a medium of evidencing barter balances. It is a claim upon
neither particular goods nor particular traders, but upon any goods in the
hands of any trader. In that sense only is there a store of value behind
monetary instruments. The idea that there is a reserve of value, such as
gold, which can back or support the money extant, is a chimera. p. 18.

The only essential is that the initiator [the issuer] be also a potential
finisher. To be such, he obviously must be a personal enterpriser, i.e., one
who is obliged to go into the market and bid for money. This requirement
being fulfilled, his issue is genuine money. p. 20.

Money does not destroy the principle of barter. It merely splits it into
halves, improving it by introducing a time lag between the surrender of
value and the requisition of value, during which lag the monetary instrument
certifies the right of the seller to make the requisition at such time and
from such trader as he may choose.

The pure monetary medium, when it comes, will be an instrument intrinsically
valueless, evidencing the transference of a value that is unidentified with
any commodity, yet has a relative requisitionary power upon all. p. 106.

The Concept of an Abstract Value Measure

... only precedent and practice are required to establish a monetary unit.
p. 128.

A Monetary Rationale

basically, there is only one commodity exchanged, and that is human effort.
Labor is the basic or virgin commodity .It has no quality of obsolescence,
for it is always associated with the latest and therefore the most timely
products. It is the only value. p. 94.

... values are always in a condition of flux, moving in and out of
commodities under the control of the law of supply and demand, and hence no
commodity retains a fixed portion of value. p. 22.

... it is mistaken to attribute purchasing power to money, for it has none;
it is merely the conduit through which purchasing power flows; such
purchasing power lying in the commodities or values exchanged. p. 23.

Gold

For many centuries, accordingly, one or more governments have always been
willing to hear the expense of maintaining the price of gold above its true
value as determined in free exchange, and thus gold has been given the
appearance of having a constant value. This has given rise to the
superstition that gold is not only stable in value, but that it is, in fact,
a criterion of value. p. 107.

Its last artificial support is the dollar, and when the dollar grows too
weak from inflation to hold the price of gold above its actual value, gold
will be on its own. The dollar will be so reduced in purchasing power that
$35 per ounce will actually be a low price for gold, and its price will rise
above that figure. p. 109.

[This was written before 1953. Things developed just as Riegel predicted.]

Definition of Money

Only by turning our backs on the muddle of past monetary economics can we
fully understand the subject of money. We must reject such irrelevancies as
metallic and other standards, managed currency, bullion and specie
redemption, quantity theories, legal tender, and other issues which have
consumed endless hours of debate. Let us simply apply our common sense to
the rationalization of the subject of money. Error has labyrinths; truth is
an obelisk.

a) Money is a Receipt for Value

b) Expressed in Terms of a Value Unit, and is

c) A Transferable Claim

d) For an Equivalent Value

e) To be Determined by Competitive Exchange

f) In Which the Issuer is an Active Vendor

g) Whose Issue Conforms to the Customs of a Convention of Participants in
the Monetary System.

p. 23.

Monetary credit must be a social credit, backed by all participants in the
exchange system but identified with none.

Only under free competition can the requirements of trade equitably regulate
the value of money.

He who would create money to buy goods or services must be prepared to
produce goods or services with which to buy money. p. 24.

The rules and regulations prescribed in the convention of the participants
must be honored, to assure fidelity of issue. This implies a formally
structured monetary system and authority which establishes the monetary
unit, prescribes the issuing process, its limits, the implements to be used,
and such other mutually acceptable rules as will give dependability to the
unit and to the system.

Breviate

The purpose of money is to facilitate barter by splitting the transaction
into two parts, the acceptor of money reserving the power to requisition
value from any trader at any time.

The method of money is to employ a concept of value in terms of a value unit
dissociated from any object.

The monetary unit is any adopted value, which value is the basis relative to
which other values may be expressed.

The monetary system is a cooperative agreement among traders to regulate the
issuance of monetary instruments, to express and exchange values in terms of
the monetary unit, and to keep account of such exchanges. .

Monetary instruments may be any evidences of monetary transactions that
serve the convenience of trade and the purpose of accountancy. p. 25.

Circulation and Hoarding

A money hoarder, on the other hand, is one who insists on giving value
without receiving value-a monetary masochist. He harms no one but himself,
if his extraction of money circulation does not starve exchange, and it
cannot if money creation is not controlled by a monopoly. p. 134.

Banking

Commercial banks do not lend money. They permit the "borrower" to issue
money. The "loan," which is not in any true sense a loan because it does not
reduce the money resources of the lender, is simply entered as a credit to
the borrower on the books of the bank. It is a paper transaction, no money
having been lent and no new money having come into existence. The borrower,
however, now has legal authorization to write checks to the extent of the
loan and tender them in. trade. Upon their acceptance by a seller, new money
comes into existence. Until such time as the borrower, through becoming
seller, recaptures the money (extinguishes the money he created) with which
to liquidate his "loan," there may be many purchase and sale transactions
effected by the money he issued. Yet, throughout it all, not a single unit
of money has been lent or borrowed. "Borrowing money" from a commercial bank
is but a figurative phrase. It is getting authorization to create money-the
first step in the money creating process.

Money may, however, be truly borrowed from existing reserves of money. True
moneylenders include savings banks, building and loan associations, finance
companies and individuals. Such money, however, originated in commercial
banks through the process above described, and was accrued from surpluses.

Why does money lending exist? A little thought shows that it exists because
of the deficiency of commercial bank credit. p. 27.

Borrowing money offers no advantage over creating money, and it has positive
disadvantages. Interest charges are usually higher for borrowed than for
created money. To the money lender it involves the hazard of default by the
borrower, whereas default in a commercial bank "loan " is distributed,
almost painlessly, over the entire economy. "Loans" through commercial banks
are underwritten by the entire trading community, whereas a loan of existing
money is supported by the resources of the borrower alone.

Why, then do buyers resort to money lenders rather than commercial banks for
needed funds? The only answer is that the banker, the gatekeeper of the
trade channel, is limited by statute in the number of passes that he can
issue to personal enterprisers. p. 28.

Legal Counterfeit

What is not generally known - even to the perpetrators - is that governments
and banks unconsciously cooperate in legal counterfeiting.

... under the natural law of money issuance, governments cannot qualify as
issuers, because they are not in the necessitous situation of personal
enterprisers. They do not barter, and therefore have no need to escape from
barter. They do not bid for money in the open market with goods or services.
Their taxing power relieves them entirely from selling; they take merely by
taxing. Hence, when they are admitted to the issue power, their issue cannot
be a genuine promise to deliver value in trade. It must of necessity be
counterfeit,...

This legal-illegal practice is innocently perpetrated, in the United States,
not by the issuance of bills and coins, but through the loans made to the
Government by commercial banks. p. 33.

... the practice [of legalized counterfeit] arises from a universal
misconception of the source and essence of money, a misconception which
blinds legislators as well as the people they undertake to serve. Money
cannot be governed by man-made laws; it operates solely by natural law.

[This chapter contains an excellent historical account of the process by
which the Constitution was circumvented and the government has appropriated
the substance of its citizens by control of the monetary process.]

In those days, [of the Civil War-era "Greenbacks"] the means of inflating
the circulation was by printing currency. The modern way is to print bonds,
sell them to commercial banks, then print checks to draw against the bank
balance and let the currency expand according to public demand. This is the
smarter way of using the printing press. It fools the people. p. 148.

Legal counterfeit blends with the genuine money supply and is
indistinguishable from it. It is, therefore, more insidious and, through
sheer volume, vastly more destructive of the power of the monetary unit than
is illegal counterfeit. It inevitably manifests itself in higher prices of
goods and services. The public is bewildered by the higher prices, and it
requires but slight propaganda by the author of the inflation, the
Government, to deflect criticism onto private business which, in the end, is
always obliged to bring the bad news of rising prices to the people. The
public does not realize that it is, in effect, indirectly paying taxes over
the merchant's counter instead of paying them directly to the tax collector.
The Government finds this a ready way to increase taxation without being
detected. p. 39.

The destructive effect of inflation is not confined to its covert taxing
power. That is only its early manifestation. Its later destructiveness lies
in its power to amend and finally to nullify the contractual relationships
upon which the social order depends. The whole philosophy of freedom is
written in the single phrase, Power to Contract. p. 44.

Private, nonpolitical action alone can provide a true monetary system to
which the peoples of all lands may turn for self preservation. p. 48.

Any sizable group anywhere, any day, could start a nonpolitical monetary
unit and system. There is no law against it, and no legislation need be
invoked. The legal tender provision is gratuitous window dressing, for any
monetary unit that is not acceptable in trade cannot be made so by law and,
if acceptable, needs none. p. 49.

Because trade naturally tends to unify and to adopt a single monetary
language, one of these [personal enterprise monetary systems] systems,
through sheer merit, must sooner or later become universal [i.e., become a
standard]. p. 49.

To avert the utter and complete disorder of a moneyless world, however, such
a system must come into being before the present expires through total
inflation. p. 50.

The Valun System

The function of the banks would be to administer, for an appropriate service
charge, the mutual credit of their account holders. The banks would provide
credit facilities for the issuance and redemption of valuns by personal
enterprisers and would clear checks and render other appropriate banking
services. p. 52.

There would, of course, be no interest charge for lines of credit, since the
banks would take no credit risks. Traders to one another would extend the
credit, and the banks would not be involved except as administrators. Hence,
under the valun system, credit would be free, but not printing, bookkeeping,
insurance and other expenses; service costs would be paid for by the account
holders. p. 54.

Credit Limits

How much money might the banks permit each issuer to issue? As much as he
could redeem, which means, as much as he might need to get a turnover in his
business. This, admittedly, would vary with different lines. All lines,
taken together, average about four turnovers a year. Thus, roughly speaking,
business would need an issue power sufficient to span three months.

The ideal issue policy would be that each customer of the bank be empowered
to purchase equivalent to his capacity to sell and to emit sufficient money
within such limitation.

There is an ideal debit policy, but it may have to be worked out by trial
and error. p. 55.

The best principle can, however, be simply stated thus: Each person or
corporation is entitled to create as much money, by buying, as he or it is
able to redeem by selling. p. 95.

Each valun bank would adopt its own credit policy, and it is on credit
policy that most of the unsolved problems hinge. p. 136.

... exchange can operate only on a trial and error basis... It is better to
allot too much money power than too little. p. 96.

If those who want money and are willing and able to return value to the
market for it are restrained from creating that money, the functioning of
exchange democracy will be impaired. p.65.

Idle man hours are a more serious loss than unredeemed money and must never
be hazarded by overzealously guarding against credit losses. Interrupted
production is the only loss that is a net loss [to the community as a
whole]. p. 101.

Once we have established the principle of debit power [money creating power]
for all we have released a power for economic stability that does not exist
when this power is restricted to certain "creditworthy" individuals. The
full benefits of the democratization of the money creating power cannot be
forecast, but it is plain that this power could positively prevent
depression. p. 99.

Launching the Valun System

... the valun would have an initial value of one dollar, which would be
equal to the power of the dollar on the day of the valun's launching.
Thereafter, it would be entirely dissociated from the dollar and independent
of any subsequent fluctuations in value that the dollar might have. p. 57.

[This is the main point on which Riegel and I disagree. Sure the dollar
should be the starting point, since that is the value concept that is
ingrained in us in the U. S., but it is unreasonable to expect that the
valun will develop an independent meaning without some help - it needs a
lever to lift it out of the dollar rut. That, in my opinion, must be some
concrete physical reference - a commodity or basket of commodities. This
would be allow people to simultaneously hold two value concepts, the dollar
and the valun, and be ever cognizant of the relationship between the two.
Riegel elaborates on this point in Private Enterprise Money; I've written a
retort that will eventually be posted to the web. - t.h.g.]


Existing banks presumably could open valun departments without legal
difficulty or political embarrassment, since under the valun system, they
would extend no credit and therefore take no risks. Banks would merely
administer the credit extended by the account holders to one another. p. 57.

The actual launching of the valun might be accomplished by enlisting a
number of business concerns to pay their bills with valdol checks, which
would offer the payee the option of accepting payment in valuns or dollars.

In the case of a shortage of either valuns or dollars in an account, and
there being an adequate balance of the other, the bank would be authorized
to sell a sufficient amount of the long unit on the money market to offset
the deficit in the short unit.

It is no more necessary for men generally to understand the science of money
than it is for them to understand the science of any other utility. Given a
sufficient number of traders to participate initially, it will take only a
few directing individuals to put the system into operation. p.61.

To whom shall we look to start the valun? We must look to employers, for as
we have seen, it is the buyer and not the seller who creates money. The
common man begins his exchange activities by selling his services. p. 68.

The first buyer in the chain of exchange is the employer. Therefore we must
look to employers to start the valun, and employees have the right to expect
it to be trustworthy. Employees will repose confidence in what employers
profess to be an honest medium of exchange, and they will underwrite that
medium with the basic commodity, the mother of all wealth, namely brain and
brawn and sweat.

If we distribute buying power adequately, the products of industry will be
drawn by the buyer rather than having to be pushed by the seller. With the
equitable distribution of the money power, the distribution of goods and
services will no longer be a problem. p. 69-70.

... the unemployed man can do more harm to the economy by not buying, than
by buying on bank credit, even though his credit remains unliquidated. By
the latter process, he isolates the germ of unemployment; by the former, he
renders it epidemic.

Inflation/Deflation

Boom results from an expansion of the genuine money supply. This is not
inflationary, because it justifies itself by an expansion of production and
trade.

Inflation, on the other hand, is the result of the injection of monetary
units into the money supply without an offsetting increase of values in the
market place.

Bust results from a reduction of the genuine money supply, which is brought
about by bankers calling or, as they mature, failing to renew, the "loans"
upon which the money is based.

Deflation is not to be confused with bust, for there cannot be deflation
without prior inflation. Just as inflation is not an increase in the genuine
money supply, so deflation is not a reduction. Both are produced by
governments. By deficit financing (through borrowing from banks) water is
injected into the circulation, and by surplus budgets it is extracted, in no
wise affecting in either operation the substance of the money supply.

Omnibus Reform

There are no tyrants among men; there are only tyrannies, and the mother of
tyrannies is money monopoly. p. 73.

Just as the political monetary system trends power toward the state, so the
system based on true money will release the natural forces that trend
society toward private initiative, enterprise and democracy. Pending this
fundamental reversal, all resistance to statism is futile. As long as the
only available monetary system is political, exchange, that process by which
the social order functions, will never accomplish its natural purpose, the
development of prosperity and freedom. p. 73.

To rely on education to reverse the present trend toward statism shows a
want of comprehension of the naturalness of personal enterprise. No one
needs to be educated in private initiative and enterprise. These qualities
arise spontaneously. All that is needed is that the counterfeiting power of
the state, which robs productive effort and rewards parasitism, be removed.
p. 73.


The trouble has arisen from the failure of personal enterprisers to provide
a sound monetary system of, by, and for personal enterprise. In their
default, the state has contrived a socialized system.

... reformers almost universally turn to political rather than economic
means of reform. Thus their reform efforts effected through political
action, actually salute and strengthen the generator of the evils against
which the reforms are directed. p. 74

The state's profession of being an instrument of democracy is pure sham. It
is inherently exploitative and autocratic, because it has no means of
invoking support by appeal to voluntary patronage. It lives by taxation and
functions by edict: To regard the state as the implement of democracy, when
it is itself anti-democratic, is surely the most consummate delusion of man.

Let us have done with the idea that democracy can reside in, or operate
through, the state; nothing can be democratic that is not dependent upon
voluntary patronage. p. 75.

Once the state is denied its power to impose taxes by watering the money
stream and is confronted with an aggressive personal enterprise movement
that will take over services for which there is actual demand, its
disservices will be recognized as such simply because personal enterprise
will make no bid for them. Public resistance to taxation will then dispose
of them.

Exchange, served by a true monetary system, is a constant reform mechanism.
It is the sifter of proposals and projects, the natural mechanism whereby
all undertakings are measured for public approval. Its constituency votes
early and often, making change and progress facile. Served by an unbiased
monetary system, it will be the perfect instrument of democracy. Here will
democracy function, vindicating its ideal. p. 76.

... our whole society is tainted with paternalism. The blame for the
political perversion of the monetary system must be placed upon society. For
it has tried to escape the task of rationalizing the subject and has thrust
the problem upon the Great White Father, who is just as ignorant as to what
constitutes money but is, of course, glad to grasp power. p. 153.

The so-called academic or conservative or classical teachers and writers are
merely different categories of socialists, because they all accept the
socialization of the monetary system [i.e., state control of the monetary
system.]. p. 153.

Democracy

Human aspirations for freedom can never be gratified as long as there is a
veto power over self expression, whether imposed by a man on horseback or by
means of the ballot box.

Yet the democratic state has no means of functioning other than by popular
elections. That being so, the functions of the state must be limited to
those public services which are desired by all. Consider the folly of
undertaking to express the people's will in all human affairs by an
occasional election at which, in one confused shout, we sound our yeas and
nays on a multitude of questions. At the same time, we select
representatives to guess what it all means, and to divine from it how to
execute our will on hundreds of issues that arise after we have given our
confused "mandate." ... Can we have self-government, and at the same time
delegate the power to govern? p. 78.

[Quoting Arthur Kitson in "A Scientific Solution of the Money Question,"
1894 ...] "The issuance of money must be free, in order that industry and
commerce may be free; and commerce must be free in order that people may be
free. Freedom to life necessitates freedom to maintain life, and this
involves freedom of exchanges. Denial of free money is, therefore, a denial
of freedom to life."

It is astounding to me that Kitson, after thinking so clearly and
fundamentally on money, should have since lapsed into a political money
reformer instead of devoting his life to promulgating private enterprise
money. p. 131.

It is through the preservation and perfection of the monetary system that
economic democracy will demonstrate its potential for human welfare.... The
establishment of a nonpolitical monetary system is but an undertaking in
accountancy. p. 80. [This has be amply demonstrated by the emergence of LETS
and other mutual credit clearing systems.]

None will be coerced to participate. None will be barred. There will be but
one monetary language for the world, and a democratic monetary system will
unite people everywhere in the universal freedom of exchange. p. 81.

New Vistas

Ideas have wings. There is no transportation problem in the export of an
idea, and one may give an idea without losing it. Both the giver and the
receiver are benefited if the idea is sound. Let us give the peoples of the
world an idea, a liberating idea, a constructive idea that involves no
sacrifice on our part and no obligation or embarrassment on the part of
others.

The authentic approach to realizing man's dream of world union is through
the vehicle of a nonpolitical monetary system.

We are approaching the universal collapse of the political monetary system.
With such collapse will come revolutions, unless an alternative monetary
system shall first come into existence. A true monetary system could avert
the chaos and forestall revolution, thereby preserving the existing national
states even while gradually rendering them harmless. For the political
monetary system is the principal instrument of state separatism. Once it is
gone, all other interferences with production and exchange will recede.
Denied power over the economy through the-ir respective monetary systems,
the states will be obliged to abandon their paternalistic pose and stand
before the people in their true light, as dependents without productive
powers, and utterly devoid of any powers of largess. The trend of human
affairs will then be as irresistibly toward individualism and self
determination as the present trend is toward socialism and domination by the
state. p. 84.

Since no social order has heretofore been predicated upon the principle of a
nonpolitical monetary system, it follows that its promulgation will require
a revolution in thought and action and that it will be many years before its
full implications can be comprehended. ...When he [the natural person]
asserts that the creation of money is within his own powers, he will
surmount the last major barrier to self advancement and a limitless horizon
will open before him. p. 85.

I see no need for international relations, and I am sure there is no demand
for it, except from special interests that have no respect for the rights of
others. It is the provocateur of war. "A decent respect for the opinions of
mankind " dictates that no national government have any opinions or policies
pertaining to the affairs of other governments or peoples. The conscience
and culture of one people should be allowed to react directly upon other
people without the intervention of governments. p. 132.

>From a letter to Mildred Loomis (May 21, 1949)

Social reformers are divided into many movements, and each has its pro and
con. None of these issues can be resolved under the existing political
monetary system; which frustrates the operation of economic democracy, a
process that can operate only by means of a true monetary system. If one
tenth of the energy expended in attaining ends could be consolidated upon
realizing the means, the world's problems could be quickly solved.

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<DIV>&nbsp;</DIV>
<DIV style=3D"FONT: 10pt arial">----- Original Message -----=20
<DIV style=3D"BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A=20
title=3Dcirc2@mindspring.com href=3D"mailto:circ2@mindspring.com">Thomas =
H. Greco,=20
Jr.</A> </DIV>
<DIV><B>To:</B> <A title=3Dijccr@yahoogroups.com=20
href=3D"mailto:ijccr@yahoogroups.com">IJCCR</A> ; <A=20
title=3DJust_trade_discussion@yahoogroups.com=20
href=3D"mailto:Just_trade_discussion@yahoogroups.com">Just_trade_discussi=
on@yahoogroups.com</A>=20
</DIV>
<DIV><B>Cc:</B> <A title=3Dmike@axxess.net =
href=3D"mailto:mike@axxess.net">Aldana=20
Mike</A> ; <A title=3Dkees@axxess.net =
href=3D"mailto:kees@axxess.net">Keesler=20
Mike</A> ; <A title=3Dkstennant@cableone.net=20
href=3D"mailto:kstennant@cableone.net">Tennant Kenneth</A> ; <A=20
title=3Dgary.flo@uvm.edu href=3D"mailto:gary.flo@uvm.edu">Flo Gary</A> ; =
<A=20
title=3Dgeonomist@juno.com href=3D"mailto:geonomist@juno.com">Smith =
Jeff</A> </DIV>
<DIV><B>Sent:</B> Monday, May 19, 2003 7:36 AM</DIV>
<DIV><B>Subject:</B> Riegel precis</DIV></DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial size=3D2>Here, fyi,&nbsp;is a pr=E9cis of =
Riegel's <EM>Flight=20
>From Inflation.</EM> I've also appended it as a Word=20
attachment.&nbsp;</FONT></DIV>
<DIV><FONT face=3DArial size=3D2>I think it captures the most important =
points and=20
shows the depth of Riegel's insights about the nature of money and its=20
liberation. </FONT></DIV>
<DIV><FONT face=3DArial size=3D2>All of Riegel's most important works =
will soon be=20
available at&nbsp;ReinventingMoney.com.</FONT></DIV>
<DIV><FONT face=3DArial></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial size=3D2>I encourage everyone to read his =
<EM>Private=20
Enterprise Money</EM> now at </DIV>
<DIV><FONT face=3DArial size=3D2><A=20
href=3D"http://www.mind-trek.com/treatise/ecr-pem/index.htm">http://www.m=
ind-trek.com/treatise/ecr-pem/index.htm</A><FONT=20
size=3D2>.</FONT></FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=3D2>Cheers,</FONT></DIV>
<DIV>Tom</DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=3D2></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial size=3D2>
<P><B><I>FLIGHT FROM INFLATION: The Monetary Alternative</P></B></I>
<P>By E. C. RIEGEL</P>
<P><B><I>An annotated pr=E9cis prepared by Thomas H. Greco, Jr.</B></I> =
May 18,=20
2003</P><I>
<P>Shortly after reading this astounding work in 1987, I prepared a =
pr=E9cis of=20
it, extracting the most provocative statements and evident truths for =
the=20
benefit of a small circle of correspondents. This pr=E9cis was lost to =
me until a=20
recent move caused a hard copy to surface. Since two or three subsequent =

computer upgrades have caused the original digital file to disappear, I =
have=20
undertaken to repeat my earlier effort for the benefit of an ever =
growing circle=20
of monetary freedom advocates and exchange innovators. Now that the =
entire=20
volume of</I> Flight<I> has been digitized, it will be much more =
accessible and=20
easier to extract. In the following, all of Riegel's words are in =
regular type,=20
with my comments being in italics and enclosed in square brackets. I =
have bolded=20
phrases that I think merit particular attention, and have added some =
topical=20
headings that may or may not correspond to the headings in the book. =
Page=20
numbers, where given, refer to the page in the bound volume published by =
Spencer=20
MacCallum, not the digital file. </I>&#8211; Thomas H. Greco, Jr. May =
18, 2003</P><B>
<P>Introduction</P></B>
<P>THIS BOOK PRESENTS a new concept of money, one which promises greater =
freedom=20
and a broader base for democracy. It points up the futility of the =
political=20
ballot-and the facility of the monetary 'ballot'-for the attainment of =
human=20
aspirations. It elucidates an evolution that has progressed unobserved =
since the=20
inception of monetary media and that is now coming to an end in what =
appears, on=20
the surface, to be a world calamity.</P>
<P>This book is the first to depart from the traditional concept of =
money as an=20
instrument of the state. It is the first to propose that money and state =
be=20
separate.</P><I>
<P>[Since the 1940's, when these words were written, others, even a few =
academic=20
economists, have begun to call for the separation of money and state. =
Yet, the=20
masses of people remain ignorant and enthralled by a power they do not=20
understand, a power that is at once political, as well as economic. The =
global=20
political monetary regime has been the primary instrument by which power =
and=20
wealth have become ever more concentrated in fewer hands, and democracy =
and=20
freedom have been progressively eroded. Its inherent flaws and =
dysfunctions are=20
responsible for enormous suffering, and the calamity of which Riegel =
spoke is=20
upon us. Riegel's insights into the nature and mechanisms of money go a =
long way=20
toward illuminating the path toward peace and freedom. Let us hope that =
they can=20
be quickly implemented before world despotism becomes total.]</P></I>
<P></P><B>
<P>The Nature of Money</P></B>
<P>The essential quality of money, however, is its promise to deliver =
value in=20
<I>any commodity or service at the choice of the holder. </I>p. 14.</P>
<P>Unlike a dollar bill or a dollar check, for example, a silver dollar =
is not=20
wholly money. The former are complete split-barter instruments, while =
the silver=20
dollar is a qualified split-barter instrument, in that some value is =
conveyed=20
with the promise. To that extent it is not money. If a silver dollar =
contains=20
fifty cents worth of silver, its transference is half a monetary =
transaction and=20
half a barter transaction. pp. 14-15.</P><B>
<P>A would-be money issuer must, in exchange for the goods or services =
he buys=20
from the market, place goods or services on the market. In this simple =
rule of=20
equity lies the essence of money.</P></B>
<P>... it is apparent that the buyer who issued the monetary instrument =
to the=20
seller has made a commitment to the community that is that he, in his =
turn, will=20
engage in business, <I>i.e.</I> will bid for money by offering his own =
goods and=20
services in the open market. In this competitive situation, he redeems =
his=20
original issue through the sale of his goods and services. Thus money is =

actually backed by the value surrendered by the seller and potentially =
backed by=20
a value in the possession of the next seller. p. 15</P><B>
<P>...two factors are necessary to money creation: a buyer, who issues =
it, and a=20
seller, who accepts it.</B> Since the seller expects, in turn, to =
reissue the=20
money to some seller, it will be seen that <B>money springs from mutual =
interest=20
and cooperative action among traders, and not from authority. </P></B>
<P>... money is an accounting system,.. p. 16.</P>
<P>... the basis of money is a pledge to surrender value on demand =
&#8211; to offer=20
goods or services in the market at competitive or market price and, =
thereby, to=20
give value when money is tendered. p. 17.</P><B>
<P>Money is created by the process of incurring a debit and is destroyed =
by the=20
process of offsetting a debit.</P></B>
<P>The volume of money extant, therefore, has no relation to the volume =
of=20
business transacted in its name. The volume of money is determined by =
the amount=20
of deferred spending, or "savings."</P>
<P>... money is but a medium of evidencing barter balances. It is a =
claim upon=20
neither particular goods nor particular traders, but upon any goods in =
the hands=20
of any trader. In that sense only is there a store of value behind =
monetary=20
instruments. <B>The idea that there is a reserve of value, such as gold, =
which=20
can back or support the money extant, is a chimera.</B> p. 18.</P>
<P>The only essential is that the initiator <I>[the issuer]</I> be also =
a=20
potential finisher. To be such, he obviously must be a personal =
enterpriser,=20
<I>i.e.</I>, one who is obliged to go into the market and bid for money. =
This=20
requirement being fulfilled, his issue is genuine money. p. 20.</P>
<P>Money does not destroy the principle of barter. It merely splits it =
into=20
halves, improving it by introducing a time lag between the surrender of =
value=20
and the requisition of value, during which lag the monetary instrument =
certifies=20
the right of the seller to make the requisition at such time and from =
such=20
trader as he may choose.</P><B>
<P>The pure monetary medium, when it comes, will be an instrument =
intrinsically=20
valueless, evidencing the transference of a value that is unidentified =
with any=20
commodity, yet has a relative requisitionary power upon all.</B> p. =
106.</P><B>
<P>The Concept of an Abstract Value Measure</P></B>
<P>... only precedent and practice are required to establish a monetary =
unit. p.=20
128.</P><B>
<P>A Monetary Rationale</P></B>
<P>basically, there is only one commodity exchanged, and that is human =
effort.=20
Labor is the basic or virgin commodity .It has no quality of =
obsolescence, for=20
it is always associated with the latest and therefore the most timely =
products.=20
It is the only value. p. 94.</P>
<P>... values are always in a condition of flux, moving in and out of=20
commodities under the control of the law of supply and demand, and hence =
no=20
commodity retains a fixed portion of value. p. 22.</P>
<P>... it is mistaken to attribute purchasing power to money, for it has =
none;=20
it is merely the conduit through which purchasing power flows; such =
purchasing=20
power lying in the commodities or values exchanged. p. 23.</P><B>
<P>Gold</P></B>
<P>For many centuries, accordingly, one or more governments have always =
been=20
willing to hear the expense of maintaining the price of gold above its =
true=20
value as determined in free exchange, and thus gold has been given the=20
appearance of having a constant value. This has given rise to the =
superstition=20
that gold is not only stable in value, but that it is, in fact, a =
criterion of=20
value. p. 107.</P>
<P>Its last artificial support is the dollar, and when the dollar grows =
too weak=20
from inflation to hold the price of gold above its actual value, gold =
will be on=20
its own. The dollar will be so reduced in purchasing power that $35 per =
ounce=20
will actually be a low price for gold, and its price will rise above =
that=20
figure. p. 109. </P><I>
<P>[This was written before 1953. Things developed just as Riegel=20
predicted.]</P></I><B>
<P>Definition of Money</P></B>
<P>Only by turning our backs on the muddle of past monetary economics =
can we=20
fully understand the subject of money. We must reject such irrelevancies =
as=20
metallic and other standards, managed currency, bullion and specie =
redemption,=20
quantity theories, legal tender, and other issues which have consumed =
endless=20
hours of debate. Let us simply apply our common sense to the =
rationalization of=20
the subject of money. <B>Error has labyrinths; truth is an =
obelisk.</P></B>
<P>a) Money is a Receipt for Value</P>
<P>b) Expressed in Terms of a Value Unit, and is</P>
<P>c) A Transferable Claim</P>
<P>d) For an Equivalent Value</P>
<P>e) To be Determined by Competitive Exchange</P>
<P>f) In Which the Issuer is an Active Vendor</P>
<P>g) Whose Issue Conforms to the Customs of a Convention of =
Participants in the=20
Monetary System.</P>
<P>p. 23.</P>
<P>Monetary credit must be a <I>social </I>credit, backed by all =
participants in=20
the exchange system but identified with none.</P><B>
<P>Only under free competition can the requirements of trade equitably =
regulate=20
the value of money.</P></B><B>
<P>He who would create money to buy goods or services must be prepared =
to=20
produce goods or services with which to buy money.</B> p. 24.</P>
<P>The rules and regulations prescribed in the convention of the =
participants=20
must be honored, to assure fidelity of issue. This implies a formally =
structured=20
monetary system and authority which establishes the monetary unit, =
prescribes=20
the issuing process, its limits, the implements to be used, and such =
other=20
mutually acceptable rules as will give dependability to the unit and to =
the=20
system.</P><B>
<P>Breviate</P></B><I></I><B>
<P>The purpose of money is to facilitate barter by splitting the =
transaction=20
into two parts</B>, the acceptor of money reserving the power to =
requisition=20
value from any trader at any time. </P>
<P>The method of money is to employ a concept of value in terms of a =
value unit=20
dissociated from any object.</P>
<P>The monetary unit is any adopted value, which value is the basis =
relative to=20
which other values may be expressed.</P><B>
<P>The monetary system is a cooperative agreement among traders to =
regulate the=20
issuance of monetary instruments, to express and exchange values in =
terms of the=20
monetary unit, and to keep account of such exchanges.</B> .</P>
<P>Monetary instruments may be any evidences of monetary transactions =
that serve=20
the convenience of trade and the purpose of accountancy. p. 25.</P><B>
<P>Circulation</B> <B>and Hoarding</P></B>
<P>A money hoarder, on the other hand, is one who insists on giving =
value=20
without receiving value-a monetary masochist. He harms no one but =
himself, if=20
his extraction of money circulation does not starve exchange, and it =
cannot if=20
money creation is not controlled by a monopoly. p. 134.</P><B>
<P>Banking</P></B><B>
<P>Commercial banks do not lend money.</B> They permit the "borrower" to =
issue=20
money. The "loan," which is not in any true sense a loan because it does =
not=20
reduce the money resources of the lender, is simply entered as a credit =
to the=20
borrower on the books of the bank. It is a paper transaction, no money =
having=20
been lent and no new money having come into existence. The borrower, =
however,=20
now has legal authorization to write checks to the extent of the loan =
and tender=20
them in. trade. Upon their acceptance by a seller, new money comes into=20
existence. Until such time as the borrower, through becoming seller, =
recaptures=20
the money (extinguishes the money he created) with which to liquidate =
his=20
"loan," there may be many purchase and sale transactions effected by the =
money=20
he issued. Yet, throughout it all, not a single unit of money has been =
lent or=20
borrowed. <B>"Borrowing money" from a commercial bank is but a =
figurative=20
phrase. It is getting authorization to create money-the first step in =
the money=20
creating process.</P></B><B>
<P>Money may, however, be truly borrowed from existing reserves of =
money.</B>=20
True moneylenders include savings banks, building and loan associations, =
finance=20
companies and individuals. Such money, however, originated in commercial =
banks=20
through the process above described, and was accrued from =
surpluses.</P><B>
<P>Why does money lending exist? A little thought shows that it exists =
because=20
of the deficiency of commercial bank credit.</B> p. 27.</P><B>
<P>Borrowing money offers no advantage over creating money, and it has =
positive=20
disadvantages.</B> Interest charges are usually higher for borrowed than =
for=20
created money. To the money lender it involves the hazard of default by =
the=20
borrower, whereas default in a commercial bank "loan " is distributed, =
almost=20
painlessly, over the entire economy. "Loans" through commercial banks =
are=20
underwritten by the entire trading community, whereas a loan of existing =
money=20
is supported by the resources of the borrower alone.</P>
<P>Why, then do buyers resort to money lenders rather than commercial =
banks for=20
needed funds? The only answer is that the banker, the gatekeeper of the =
trade=20
channel, is limited by statute in the number of passes that he can issue =
to=20
personal enterprisers. p. 28.</P><B>
<P>Legal Counterfeit</P></B><B>
<P>What is not generally known - even to the perpetrators - is that =
governments=20
and banks unconsciously cooperate in <I>legal =
</I>counterfeiting.</P></B>
<P>... under the natural law of money issuance, governments cannot =
qualify as=20
issuers, because they are not in the necessitous situation of personal=20
enterprisers. They do not barter, and therefore have no need to escape =
from=20
barter. They do not bid for money in the open market with goods or =
services.=20
Their taxing power relieves them entirely from selling; they take merely =
by=20
taxing. Hence, when they are admitted to the issue power, their issue =
cannot be=20
a genuine promise to deliver value in trade. It must of necessity be=20
counterfeit,...</P>
<P>This legal-illegal practice is innocently perpetrated, in the United =
States,=20
not by the issuance of bills and coins, but through the loans made to =
the=20
Government by commercial banks. p. 33.</P>
<P>... the practice <I>[of legalized counterfeit] </I>arises from a =
universal=20
misconception of the source and essence of money, a misconception which =
blinds=20
legislators as well as the people they undertake to serve. <B>Money =
cannot be=20
governed by man-made laws; it operates solely by natural law.</P></B><I>
<P>[This chapter contains an excellent historical account of the process =
by=20
which the Constitution was circumvented and the government has =
appropriated the=20
substance of its citizens by control of the monetary process.]</P></I>
<P>In those days, <I>[of the Civil War-era "Greenbacks"]</I> the means =
of=20
inflating the circulation was by printing currency. The modern way is to =
print=20
bonds, sell them to commercial banks, then print checks to draw against =
the bank=20
balance and let the currency expand according to public demand. This is =
the=20
smarter way of using the printing press. It fools the people. p. =
148.</P><B>
<P>Legal counterfeit blends with the genuine money supply and is=20
indistinguishable from it. It is, therefore, more insidious and, through =
sheer=20
volume, vastly more destructive of the power of the monetary unit than =
is=20
illegal counterfeit.</B> It inevitably manifests itself in higher prices =
of=20
goods and services. The public is bewildered by the higher prices, and =
it=20
requires but slight propaganda by the author of the inflation, the =
Government,=20
to deflect criticism onto private business which, in the end, is always =
obliged=20
to bring the bad news of rising prices to the people. The public does =
not=20
realize that it is, in effect, indirectly paying taxes over the =
merchant's=20
counter instead of paying them directly to the tax collector. The =
Government=20
finds this a ready way to increase taxation without being detected. p. =
39.</P>
<P>The destructive effect of inflation is not confined to its covert =
taxing=20
power. That is only its early manifestation. Its later destructiveness =
lies in=20
its power to amend and finally to nullify the contractual relationships =
upon=20
which the social order depends. <B>The whole philosophy of freedom is =
written in=20
the single phrase, <I>Power to Contract.</B></I> p. 44.</P><B>
<P>Private, nonpolitical action alone can provide a true monetary system =
to=20
which the peoples of all lands may turn for self preservation.</B> p. =
48.</P><B>
<P>Any sizable group anywhere, any day, could start a nonpolitical =
monetary unit=20
and system. There is no law against it, and no legislation need be =
invoked.</B>=20
The legal tender provision is gratuitous window dressing, for any =
monetary unit=20
that is not acceptable in trade cannot be made so by law and, if =
acceptable,=20
needs none. p. 49.</P>
<P>Because trade naturally tends to unify and to adopt a single monetary =

language, one of these <I>[personal enterprise monetary systems] =
</I>systems,=20
through sheer merit, must sooner or later become universal<I> [i.e., =
become a=20
standard]</I>. p. 49. </P><B>
<P>To avert the utter and complete disorder of a moneyless world, =
however, such=20
a system must come into being before the present expires through total=20
inflation.</B> p. 50.</P><B>
<P>The Valun System</P></B><B>
<P>The function of the banks</B> would be to <B>administer</B>, for an=20
appropriate service charge, t<B>he mutual credit of their account =
holders.=20
</B>The banks would provide credit facilities for the issuance and =
redemption of=20
valuns by personal enterprisers <B>and would clear checks</B> and render =
other=20
appropriate banking services. p. 52. </P>
<P>There would, of course, be <B>no interest charge for lines of =
credit</B>,=20
since the banks would take no credit risks. <B>Traders to one another =
would=20
extend the credit, and the banks would not be involved except as=20
administrators.</B> Hence, under the valun system,<B> credit would be =
free</B>,=20
but not printing, bookkeeping, insurance and other expenses; service =
costs would=20
be paid for by the account holders. p. 54.</P>
<P>Credit Limits</P>
<P>How much money might the banks permit each issuer to issue? As much =
as he=20
could redeem, which means, as much as he might need to get a turnover in =
his=20
business. This, admittedly, would vary with different lines. All lines, =
taken=20
together, average about four turnovers a year. Thus, roughly speaking, =
business=20
would need an issue power sufficient to span three months.</P>
<P>The ideal issue policy would be that each customer of the bank be =
empowered=20
to purchase equivalent to his capacity to sell and to emit sufficient =
money=20
within such limitation.</P>
<P>There is an ideal debit policy, but it may have to be worked out by =
trial and=20
error. p. 55.</P><B>
<P>The best principle can, however, be simply stated thus: Each person =
or=20
corporation is entitled to create as much money, by buying, as he or it =
is able=20
to redeem by selling.</B> p. 95.</P>
<P>Each valun bank would adopt its own credit policy, and it is on =
credit policy=20
that most of the unsolved problems hinge. p. 136.</P>
<P>... exchange can operate only on a trial and error basis... It is =
better to=20
allot too much money power than too little. p. 96.</P>
<P>If those who want money and are willing and able to return value to =
the=20
market for it are restrained from creating that money, the functioning =
of=20
exchange democracy will be impaired. p.65.</P><B>
<P>Idle man hours are a more serious loss than unredeemed money</B> and =
must=20
never be hazarded by overzealously guarding against credit losses. =
Interrupted=20
production is the only loss that is a net loss <I>[to the community as a =

whole]</I>. p. 101.</P>
<P>Once we have established the principle of debit power <I>[money =
creating=20
power] </I>for all we have released a power for economic stability that =
does not=20
exist when this power is restricted to certain "creditworthy" =
individuals. The=20
full benefits of <B>the democratization of the money</B> creating power =
cannot=20
be forecast, but it is plain that this power<B> could positively prevent =

depression</B>. p. 99.</P>
<P>Launching the Valun System</P>
<P>... the valun would have an initial value of one dollar, which would =
be equal=20
to the power of the dollar on the day of the valun's launching. =
Thereafter, it=20
would be entirely dissociated from the dollar and independent of any =
subsequent=20
fluctuations in value that the dollar might have. p. 57.</P><I>
<P>[This is the main point on which Riegel and I disagree. Sure the =
dollar=20
should be the starting point, since that is the value concept that is =
ingrained=20
in us in the U. S., but it is unreasonable to expect that the valun will =
develop=20
an independent meaning without some help &#8211; it needs a lever to =
lift it out of=20
the dollar rut. That, in my opinion, must be some concrete physical =
reference &#8211;=20
a commodity or basket of commodities. This would be allow people to=20
simultaneously hold two value concepts, the dollar and the valun, and be =
ever=20
cognizant of the relationship between the two. Riegel elaborates on this =
point=20
in </I>Private Enterprise Money<I>; I've written a retort that will =
eventually=20
be posted to the web. &#8211; t.h.g.]</P></I>
<P></P><B>
<P>Existing banks presumably could open valun departments without legal=20
difficulty or political embarrassment</B>, since under the valun system, =
they=20
would extend no credit and therefore take no risks. Banks would merely=20
administer the credit extended by the account holders to one another. p. =
57.</P>
<P>The actual launching of the valun might be accomplished by enlisting =
a number=20
of business concerns to pay their bills with <I>valdol </I>checks, which =
would=20
offer the payee the option of accepting payment in valuns or dollars. =
</P>
<P>In<B> </B>the case of a shortage of either valuns or dollars in an =
account,=20
and there being an adequate balance of the other, the bank would be =
authorized=20
to sell a sufficient amount of the long unit on the money market to =
offset the=20
deficit in the short unit.</P>
<P>It is no more necessary for men generally to understand the science =
of money=20
than it is for them to understand the science of any other utility. =
<B>Given a=20
sufficient number of traders to participate initially, it will take only =
a few=20
directing individuals to put the system into operation. </B>p.61.</P>
<P>To whom shall we look to start the valun? We must look to employers, =
for as=20
we have seen, it is the buyer and not the seller who creates money. The =
common=20
man begins his exchange activities by selling his services. p. =
68.</P><B>
<P>The first <I>buyer </I>in the chain of exchange is the employer. =
Therefore we=20
must look to employers to start the valun, and employees have the right =
to=20
expect it to be trustworthy.</B> Employees will repose confidence in =
what=20
employers profess to be an honest medium of exchange, and they will =
underwrite=20
that medium with the basic commodity, the mother of all wealth, namely =
brain and=20
brawn and sweat. </P>
<P>If we distribute buying power adequately, the products of industry =
will be=20
drawn by the buyer rather than having to be pushed by the seller. With =
the=20
equitable distribution of the money power, the distribution of goods and =

services will no longer be a problem. p. 69-70.</P>
<P>... the unemployed man can do more harm to the economy by not buying, =
than by=20
buying on bank credit, even though his credit remains unliquidated. By =
the=20
latter process, he isolates the germ of unemployment; by the former, he =
renders=20
it epidemic. </P><B>
<P>Inflation/Deflation</P></B><I>
<P>Boom </I>results from an expansion of the genuine money supply. This =
is not=20
inflationary, because it justifies itself by an expansion of production =
and=20
trade.</P><I>
<P>Inflation, </I>on the other hand, is the result of the injection of =
monetary=20
units into the money supply without an offsetting increase of values in =
the=20
market place.</P><I>
<P>Bust </I>results from a reduction of the genuine money supply, which =
is=20
brought about by bankers calling or, as they mature, failing to renew, =
the=20
"loans" upon which the money is based.</P><I>
<P>Deflation </I>is not to be confused with <I>bust, </I>for <B>there =
cannot be=20
deflation without prior inflation</B>. Just as inflation is not an =
increase in=20
the genuine money supply, so deflation is not a reduction. Both are =
produced by=20
governments. By deficit financing (through borrowing from banks) water =
is=20
injected into the circulation, and by surplus budgets it is extracted, =
in no=20
wise affecting in either operation the substance of the money =
supply.</P><B>
<P>Omnibus Reform</P></B><B>
<P>There are no tyrants among men; there are only tyrannies, and the =
mother of=20
tyrannies is money monopoly.</B> p. 73.</P><FONT size=3D1></FONT>
<P>Just as the political monetary system trends power toward the state, =
so the=20
system based on true money will release the natural forces that trend =
society=20
toward private initiative, enterprise and democracy. <B>Pending this =
fundamental=20
reversal, all resistance to statism is futile.</B> As long as the only =
available=20
monetary system is political, exchange, that process by which the social =
order=20
functions, will never accomplish its natural purpose, the development of =

prosperity and freedom. p. 73.</P>
<P>To rely on education to reverse the present trend toward statism =
shows a want=20
of comprehension of the naturalness of personal enterprise. <B>No one =
needs to=20
be educated in private initiative and enterprise.</B> <B>These qualities =
arise=20
spontaneously.</B> <B>All that is needed is that the counterfeiting =
power of the=20
state, which robs productive effort and rewards parasitism, be =
removed.</B> p.=20
73.</P>
<P></P>
<P>The trouble has arisen from the failure of personal enterprisers to =
provide=20
<B>a sound monetary system of, by, and for personal enterprise.</B> In =
their=20
default, the state has contrived a socialized system. </P><B>
<P>... reformers almost universally turn to political rather than =
economic means=20
of reform. Thus their reform efforts effected through political action, =
actually=20
salute and strengthen the generator of the evils against which the =
reforms are=20
directed.</B> p. 74</P><B>
<P>The state's profession of being an instrument of democracy is pure =
sham.</B>=20
It is inherently exploitative and autocratic, because it has no means of =

invoking support by appeal to voluntary patronage. It lives by taxation =
and=20
functions by edict: To regard the state as the implement of democracy, =
when it=20
is itself anti-democratic, is surely the most consummate delusion of =
man.=20
</P><B>
<P>Let us have done with the idea that democracy can reside in, or =
operate=20
through, the state; nothing can be democratic that is not dependent upon =

voluntary patronage.</B> p. 75.</P>
<P>Once the state is denied its power to impose taxes by watering the =
money=20
stream and is confronted with an aggressive personal enterprise movement =
that=20
will take over services for which there is actual demand, its =
disservices will=20
be recognized as such simply because personal enterprise will make no =
bid for=20
them. Public resistance to taxation will then dispose of them.</P>
<P>Exchange, served by a true monetary system, is a constant reform =
mechanism.=20
It is the sifter of proposals and projects, the natural mechanism =
whereby all=20
undertakings are measured for public approval. Its constituency votes =
early and=20
often, making change and progress facile. Served by an unbiased monetary =
system,=20
it will be the perfect instrument of democracy. Here will democracy =
function,=20
vindicating its ideal. p. 76.</P><B>
<P>... our whole society is tainted with paternalism. </B>The blame for =
the=20
political perversion of the monetary system must be placed upon society. =
For it=20
has tried to escape the task of rationalizing the subject and has thrust =
the=20
problem upon the Great White Father, who is just as ignorant as to what=20
constitutes money but is, of course, glad to grasp power. p. 153.</P>
<P>The so-called academic or conservative or classical teachers and =
writers are=20
merely different categories of socialists, because they all accept the=20
socialization of the monetary system <I>[i.e., state control of the =
monetary=20
system.]</I>. p. 153.</P><B>
<P>Democracy</P></B>
<P>Human aspirations for freedom can never be gratified as long as there =
is a=20
veto power over self expression, whether imposed by a man on horseback =
or by=20
means of the ballot box.</P>
<P>Yet the democratic state has no means of functioning other than by =
popular=20
elections. That being so, the functions of the state must be limited to =
those=20
public services which are desired by all. Consider the folly of =
undertaking to=20
express the people's will in all human affairs by an occasional election =
at=20
which, in one confused shout, we sound our yeas and nays on a multitude =
of=20
questions. At the same time, we select representatives to guess what it =
all=20
means, and to divine from it how to execute our will on hundreds of =
issues that=20
arise after we have given our confused "mandate." ... Can we have=20
self-government, and at the same time delegate the power to govern? p.=20
78.</P><I>
<P>[Quoting Arthur Kitson in "A Scientific Solution of the Money =
Question," 1894=20
...]</I> "The issuance of money must be free, in order that industry and =

commerce may be free; and commerce must be free in order that people may =
be=20
free. Freedom to life necessitates freedom to maintain life, and this =
involves=20
freedom of exchanges. Denial of free money is, therefore, a denial of =
freedom to=20
life."</P>
<P>It is astounding to me that Kitson, after thinking so clearly and=20
fundamentally on money, should have since lapsed into a political money =
reformer=20
instead of devoting his life to promulgating private enterprise money. =
p.=20
131.</P>
<P>It is through the preservation and perfection of the monetary system =
that=20
economic democracy will demonstrate its potential for human welfare.... =
<B>The=20
establishment of a nonpolitical monetary system is but an undertaking in =

accountancy.</B> p. 80. <I>[This has be amply demonstrated by the =
emergence of=20
LETS and other mutual credit clearing systems.]</P></I><B>
<P>None will be coerced to participate. None will be barred.</B> There =
will be=20
but one monetary language for the world, and a democratic monetary =
system will=20
unite people everywhere in the universal freedom of exchange. p. =
81.</P><B>
<P>New Vistas</P></B><FONT face=3DArial>
<P>Ideas have wings. There is no transportation problem in the export of =
an=20
idea, and one may give an idea without losing it. Both the giver and the =

receiver are benefited if the idea is sound. Let us give the peoples of =
the=20
world an idea, a liberating idea, a constructive idea that involves no =
sacrifice=20
on our part and no obligation or embarrassment on the part of=20
others.</P></FONT><B>
<P>The authentic approach to realizing man's dream of world union is =
through the=20
vehicle of a nonpolitical monetary system.</P></B>
<P>We are approaching the universal collapse of the political monetary =
system.=20
With such collapse will come revolutions, unless an alternative monetary =
system=20
shall first come into existence. <B>A true monetary system could avert =
the chaos=20
and forestall revolution, thereby preserving the existing national =
states even=20
while gradually rendering them harmless.</B> For the political monetary =
system=20
is the principal instrument of state separatism. Once it is gone, all =
other=20
interferences with production and exchange will recede. Denied power =
over the=20
economy through the-ir respective monetary systems, the states will be =
obliged=20
to abandon their paternalistic pose and stand before the people in their =
true=20
light, as dependents without productive powers, and utterly devoid of =
any powers=20
of largess. The trend of human affairs will then be as irresistibly =
toward=20
individualism and self determination as the present trend is toward =
socialism=20
and domination by the state. p. 84.</P>
<P>Since no social order has heretofore been predicated upon the =
principle of a=20
nonpolitical monetary system, it follows that its promulgation will =
require a=20
revolution in thought and action and that it will be many years before =
its full=20
implications can be comprehended. ...When he <I>[the natural person]</I> =
asserts=20
that the creation of money is within his own powers, he will surmount =
the last=20
major barrier to self advancement and a limitless horizon will open =
before him.=20
p. 85.</P>
<P>I see no need for international relations, and I am sure there is no =
demand=20
for it, except from special interests that have no respect for the =
rights of=20
others. It is the provocateur of war. "A decent respect for the opinions =
of=20
mankind " dictates that no national government have any opinions or =
policies=20
pertaining to the affairs of other governments or peoples. The =
conscience and=20
culture of one people should be allowed to react directly upon other =
people=20
without the intervention of governments. p. 132.</P><B><I>
<P>From a letter to Mildred Loomis (May 21, 1949)</P></B></I><B>
<P>Social reformers are divided into many movements, and each has its =
pro and=20
con. None of these issues can be resolved under the existing political =
monetary=20
system; which frustrates the operation of economic democracy, a process =
that can=20
operate only by means of a true monetary system. If one tenth of the =
energy=20
expended in attaining ends could be consolidated upon realizing the =
means, the=20
world's problems could be quickly solved.</P></B>
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{\field{\*\fldinst {\lang4105  SEQ CHAPTER \\h \\r 1}}{\fldrslt }}\pard=20
{\plain \b\i FLIGHT FROM INFLATION: The Monetary Alternative}{\plain =
\i\fs22 \par
}\pard=20
{\plain By E. C. RIEGEL}{\plain \fs22 \par
}{\plain \par
}\pard =
\fi-5760\li5760\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040\tx5760=20
{\plain \b\i An annotated precis prepared by Thomas H. Greco, =
Jr.}{\plain \ul0 \tab May 18, 2003\par
}\pard=20
{\plain \par
}{\plain \i Shortly after reading this astounding work in 1987, I =
prepared a precis of it, extracting the most=20
provocative statements and evident truths for the benefit of a small =
circle of correspondents. This=20
precis was lost to me until a recent move caused a hard copy to surface. =
Since two or three subsequent=20
computer upgrades have caused the original digital file to disappear, I =
have undertaken to repeat my=20
earlier effort for the benefit of an ever growing circle of monetary =
freedom advocates and exchange=20
innovators. Now that the entire volume of}{\plain  Flight}{\plain \i  =
has been digitized, it will be much more accessible=20
and easier to extract. In the following, all of Riegel's words are in =
regular type, with my comments=20
being in italics and enclosed in square brackets. I have bolded phrases =
that I think merit particular=20
attention, and have added some topical headings that may or may not =
correspond to the headings in=20
the book. Page numbers, where given, refer to the page in the bound =
volume published by Spencer=20
MacCallum, not the digital file. }{\plain \'96 Thomas H. Greco, Jr.\ul0 =
\tab  May 18, 2003\par
}{\plain \par
}{\plain \b Introduction}{\plain \par
}{\plain \par
}{\plain THIS BOOK PRESENTS a new concept of money, one which promises =
greater freedom and a broader=20
base for democracy. It points up the futility of the political =
ballot-and the facility of the monetary=20
'ballot'-for the attainment of human aspirations. It elucidates an =
evolution that has progressed=20
unobserved since the inception of monetary media and that is now coming =
to an end in what appears,=20
on the surface, to be a world calamity.}{\plain \par
}{\plain \par
}{\plain This book is the first to depart from the traditional concept =
of money as an instrument of the state. It is=20
the first to propose that money and state be separate.}{\plain \par
}{\plain \par
}{\plain \i [Since the 1940's, when these words were written, others, =
even a few academic economists, have=20
begun to call for the separation of money and state. Yet, the masses of =
people remain ignorant and=20
enthralled by a power they do not understand, a power that is at once =
political, as well as economic.=20
The global political monetary regime has been the primary instrument by =
which power and wealth=20
have become ever more concentrated in fewer hands, and democracy and =
freedom have been=20
progressively eroded. Its inherent flaws and dysfunctions are =
responsible for enormous suffering, and=20
the calamity of which Riegel spoke is upon us. Riegel's insights into =
the nature and mechanisms of=20
money go a long way toward illuminating the path toward peace and =
freedom. Let us hope that they=20
can be quickly implemented before world despotism becomes =
total.]}{\plain \par
}{\plain \tab \par
}{\plain \b The Nature of Money}{\plain \par
}{\plain \par
}{\plain The essential quality of money, however, is its promise to =
deliver value in }{\plain \i any commodity or service at=20
the choice of the holder. }{\plain p. 14.\par
}{\plain \par
}{\plain Unlike a dollar bill or a dollar check, for example, a silver =
dollar is not wholly money. The former are=20
complete split-barter instruments, while the silver dollar is a =
qualified split-barter instrument, in that=20
some value is conveyed with the promise. To that extent it is not money. =
If a silver dollar contains fifty=20
cents worth of silver, its transference is half a monetary transaction =
and half a barter transaction.}{\plain  pp.=20
14-15.\par
}{\plain \par
}{\plain \b A would-be money issuer must, in exchange for the goods or =
services he buys from the market,=20
place goods or services on the market. In this simple rule of equity =
lies the essence of money.}{\plain \par
}{\plain \par
}{\plain ... it is apparent that the buyer who issued the monetary =
instrument to the seller has made a=20
commitment to the community that is that he, in his turn, will engage in =
business, }{\plain \i i.e.}{\plain  will bid for=20
money by offering his own goods and services in the open market. In this =
competitive situation, he=20
redeems his original issue through the sale of his goods and services. =
Thus money is actually backed=20
by the value surrendered by the seller and potentially backed by a value =
in the possession of the next=20
seller.}{\plain  p. 15\par
}{\plain \par
}{\plain \b ...two factors are necessary to money creation: a buyer, who =
issues it, and a seller, who accepts it.}{\plain =20
Since the seller expects, in turn, to reissue the money to some seller, =
it will be seen that }{\plain \b money=20
springs from mutual interest and cooperative action among traders, and =
not from authority.}{\plain \b  }{\plain \par
}{\plain \par
}{\plain ... money is an accounting system}{\plain ,.. p. 16.\par
}{\plain \par
}{\plain ... the basis of money is a pledge to surrender value on demand =
\'96 to offer goods or services in the=20
market at competitive or market price and, thereby, to give value when =
money is tendered.}{\plain  p. 17.\par
}{\plain \par
}{\plain \b Money is created by the process of incurring a debit and is =
destroyed by the process of offsetting=20
a debit.}{\plain \par
}{\plain \par
}{\plain The volume of money extant, therefore, has no relation to the =
volume of business transacted in its=20
name. The volume of money is determined by the amount of deferred =
spending, or "savings."}{\plain \par
}{\plain \par
}{\plain ... money is but a medium of evidencing barter balances. It is =
a claim upon neither particular goods nor=20
particular traders, but upon any goods in the hands of any trader. In =
that sense only is there a store of=20
value behind monetary instruments. }{\plain \b The idea that there is a =
reserve of value, such as gold, which=20
can back or support the money extant, is a chimera.}{\plain  p. 18.\par
}{\plain \par
}{\plain The only essential is that the initiator }{\plain \i [the =
issuer]}{\plain  be also a potential finisher. To be such, he obviously=20
must be a personal enterpriser, }{\plain \i i.e.}{\plain , one who is =
obliged to go into the market and bid for money. This=20
requirement being fulfilled, his issue is genuine money.}{\plain  p. =
20.\par
}{\plain \par
}{\plain Money does not destroy the principle of barter. It merely =
splits it into halves, improving it by=20
introducing a time lag between the surrender of value and the =
requisition of value, during which lag=20
the monetary instrument certifies the right of the seller to make the =
requisition at such time and from=20
such trader as he may choose.}{\plain \par
}{\plain \par
}{\plain \b The pure monetary medium, when it comes, will be an =
instrument intrinsically valueless,=20
evidencing the transference of a value that is unidentified with any =
commodity, yet has a relative=20
requisitionary power upon all.}{\plain  p. 106.\par
}{\plain \par
}{\plain \b The Concept of an Abstract Value Measure}{\plain \par
}{\plain \par
}{\plain ... only precedent and practice are required to establish a =
monetary unit. }{\plain p. 128.\par
}{\plain \par
}{\plain \b A Monetary Rationale}{\plain \par
}{\plain \par
}{\plain basically, there is only one commodity exchanged, and that is =
human effort. Labor is the basic or=20
virgin commodity .It has no quality of obsolescence, for it is always =
associated with the latest and=20
therefore the most timely products. It is the only value.}{\plain  p. =
94.\par
}{\plain \par
}{\plain ... values are always in a condition of flux, moving in and out =
of commodities under the control of the=20
law of supply and demand, and hence no commodity retains a fixed portion =
of value.}{\plain  p. 22.\par
}{\plain \par
}{\plain ... it is mistaken to attribute purchasing power to money, for =
it has none; it is merely the conduit=20
through which purchasing power flows; such purchasing power lying in the =
commodities or values=20
exchanged.}{\plain  p. 23.\par
}{\plain \par
}{\plain \b Gold}{\plain \par
}{\plain \par
}{\plain For many centuries, accordingly, one or more governments have =
always been willing to hear the=20
expense of maintaining the price of gold above its true value as =
determined in free exchange, and thus=20
gold has been given the appearance of having a constant value. This has =
given rise to the superstition=20
that gold is not only stable in value, but that it is, in fact, a =
criterion of value.}{\plain  p. 107.\par
}{\plain \par
}{\plain Its last artificial support is the dollar, and when the dollar =
grows too weak from inflation to hold the=20
price of gold above its actual value, gold will be on its own. The =
dollar will be so reduced in=20
purchasing power that $35 per ounce will actually be a low price for =
gold, and its price will rise above=20
that figure.}{\plain  p. 109. \par
}{\plain \i [This was written before 1953. Things developed just as =
Riegel predicted.]\par
}{\plain \i \par
}{\plain \b Definition of Money}{\plain \par
}{\plain \par
}{\plain Only by turning our backs on the muddle of past monetary =
economics can we fully understand the=20
subject of money. We must reject such irrelevancies as metallic and =
other standards, managed=20
currency, bullion and specie redemption, quantity theories, legal =
tender, and other issues which have=20
consumed endless hours of debate. Let us simply apply our common sense =
to the rationalization of the=20
subject of money. }{\plain \b Error has labyrinths; truth is an =
obelisk.}{\plain \par
}{\plain \par
}{\plain a) Money is a Receipt for Value}{\plain \i \par
}\sect \sectd =
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\pard=20
{\plain b) Expressed in Terms of a Value Unit, and is\par
}{\plain c) A Transferable Claim\par
}{\plain d) For an Equivalent Value\par
}{\plain e) To be Determined by Competitive Exchange\par
}{\plain f) In Which the Issuer is an Active Vendor\par
}{\plain g) Whose Issue Conforms to the Customs of a Convention of =
Participants in the Monetary System.\par
}{\plain p. 23.\par
}{\plain \par
}{\plain Monetary credit must be a }{\plain \i social }{\plain credit, =
backed by all participants in the exchange system but=20
identified with none.}{\plain \par
}{\plain }{\plain \b Only under free competition can the requirements of =
trade equitably regulate the value of=20
money.}{\plain \par
}{\plain \par
}{\plain \b He who would create money to buy goods or services must be =
prepared to produce goods or=20
services with which to buy money.}{\plain  p. 24.\par
}{\plain \par
}{\plain The rules and regulations prescribed in the convention of the =
participants must be honored, to assure=20
fidelity of issue. This implies a formally structured monetary system =
and authority which establishes=20
the monetary unit, prescribes the issuing process, its limits, the =
implements to be used, and such other=20
mutually acceptable rules as will give dependability to the unit and to =
the system.}{\plain \par
}{\plain \par
}{\plain \b Breviate}{\plain \i \par
}{\plain \i \par
}\pard =
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{\plain \b The purpose of money is to facilitate barter by splitting the =
transaction into two parts}{\plain , the=20
acceptor of money reserving the power to requisition value from any =
trader at any time.\ul0 \tab \par
}{\plain The method of money is to employ a concept of value in terms of =
a value unit dissociated from any=20
object.\par
}{\plain The monetary unit is any adopted value, which value is the =
basis relative to which other values may be=20
expressed.\par
}\pard =
\tx0\tx4033\tx4320\tx5040\tx5760\tx6480\tx7200\tx7920\tx8640\tx9360\tx100=
80
{\plain \b The monetary system is a cooperative agreement among traders =
to regulate the issuance of=20
monetary instruments, to express and exchange values in terms of the =
monetary unit, and to keep=20
account of such exchanges.}{\plain \ul0 \tab .\par
}\pard =
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\tx7920\tx8640\tx9360\tx10080
{\plain Monetary instruments may be any evidences of monetary =
transactions that serve the convenience of=20
trade and the purpose of accountancy. p. 25.\par
}{\plain \par
}{\plain \b Circulation}{\plain  }{\plain \b and Hoarding}{\plain \par
}{\plain \par
}{\plain A money hoarder, on the other hand, is one who insists on =
giving value without receiving value-a=20
monetary masochist. He harms no one but himself, if his extraction of =
money circulation does not=20
starve exchange, and it cannot if money creation is not controlled by a =
monopoly.}{\plain  p. 134.\par
}{\plain \par
}{\plain \b Banking}{\plain \par
}\pard =
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\tx7920\tx8640\tx9360\tx10080
{\plain \par
}{\plain \b Commercial banks do not lend money.}{\plain  }{\plain They =
permit the "borrower" to issue money. The "loan,"=20
which is not in any true sense a loan because it does not reduce the =
money resources of the lender, is=20
simply entered as a credit to the borrower on the books of the bank. It =
is a paper transaction, no money=20
having been lent and no new money having come into existence. The =
borrower, however, now has=20
legal authorization to write checks to the extent of the loan and tender =
them in. trade. Upon their=20
acceptance by a seller, new money comes into existence. Until such time =
as the borrower, through=20
becoming seller, recaptures the money (extinguishes the money he =
created) with which to liquidate his=20
"loan," there may be many purchase and sale transactions effected by the =
money he issued. Yet,=20
throughout it all, not a single unit of money has been lent or borrowed. =
}{\plain \b "Borrowing money" from a=20
commercial bank is but a figurative phrase. It is getting authorization =
to create money-the first=20
step in the money creating process.}{\plain \par
}{\plain \par
}{\plain \b Money may, however, be truly borrowed from existing reserves =
of money.}{\plain  True moneylenders=20
include savings banks, building and loan associations, finance companies =
and individuals. Such=20
money, however, originated in commercial banks through the process above =
described, and was=20
accrued from surpluses.}{\plain \par
}{\plain \par
}{\plain \b Why does money lending exist? A little thought shows that it =
exists because of the deficiency of=20
commercial bank credit.}{\plain  p. 27.\par
}{\plain \par
}{\plain \b Borrowing money offers no advantage over creating money, and =
it has positive disadvantages.}{\plain =20
Interest charges are usually higher for borrowed than for created money. =
To the money lender it=20
involves the hazard of default by the borrower, whereas default in a =
commercial bank "loan " is=20
distributed, almost painlessly, over the entire economy. "Loans" through =
commercial banks are=20
underwritten by the entire trading community, whereas a loan of existing =
money is supported by the=20
resources of the borrower alone.\par
}{\plain \par
}{\plain Why, then do buyers resort to money lenders rather than =
commercial banks for needed funds? The=20
only answer is that the banker, the gatekeeper of the trade channel, is =
limited by statute in the number=20
of passes that he can issue to personal enterprisers.}{\plain  p. =
28.\par
}{\plain \par
}{\plain \b Legal Counterfeit}{\plain \par
}{\plain \par
}{\plain \b What is not generally known - even to the perpetrators - is =
that governments and banks=20
unconsciously cooperate in }{\plain \b\i legal }{\plain \b =
counterfeiting.}{\plain \par
}{\plain \par
}{\plain ... }{\plain  under the natural law of money issuance, =
governments cannot qualify as issuers, because they are=20
not in the necessitous situation of personal enterprisers. They do not =
barter, and therefore have no=20
need to escape from barter. They do not bid for money in the open market =
with goods or services.=20
Their taxing power relieves them entirely from selling; they take merely =
by taxing. Hence, when they=20
are admitted to the issue power, their issue cannot be a genuine promise =
to deliver value in trade. It=20
must of necessity be counterfeit,}{\plain ...\par
}{\plain \par
}{\plain This legal-illegal practice is innocently perpetrated, in the =
United States, not by the issuance of bills=20
and coins, but through the loans made to the Government by commercial =
banks. }{\plain p. 33.\par
}{\plain \par
}{\plain ... the practice }{\plain \i [of legalized counterfeit] =
}{\plain arises from a universal misconception of the source and=20
essence of money, a misconception which blinds legislators as well as =
the people they undertake to=20
serve. }{\plain \b Money cannot be governed by man-made laws; it =
operates solely by natural law.}{\plain \par
}{\plain \par
}{\plain \i [This chapter contains an excellent historical account of =
the process by which the Constitution was=20
circumvented and the government has appropriated the substance of its =
citizens by control of the=20
monetary process.]}{\plain \par
}{\plain \par
}{\plain In those days, }{\plain \i [of the Civil War-era =
\'93Greenbacks\'94]}{\plain  the means of inflating the circulation was =
by=20
printing currency. The modern way is to print bonds, sell them to =
commercial banks, then print checks=20
to draw against the bank balance and let the currency expand according =
to public demand. This is the=20
smarter way of using the printing press. It fools the people.}{\plain  =
p. 148.\par
}{\plain \par
}{\plain \b Legal counterfeit blends with the genuine money supply and =
is indistinguishable from it. It is,=20
therefore, more insidious and, through sheer volume, vastly more =
destructive of the power of the=20
monetary unit than is illegal counterfeit.}{\plain  It inevitably =
manifests itself in higher prices of goods and=20
services. The public is bewildered by the higher prices, and it requires =
but slight propaganda by the=20
author of the inflation, the Government, to deflect criticism onto =
private business which, in the end, is=20
always obliged to bring the bad news of rising prices to the people. The =
public does not realize that it=20
is, in effect, indirectly paying taxes over the merchant's counter =
instead of paying them directly to the=20
tax collector. The Government finds this a ready way to increase =
taxation without being detected. p.=20
39.\par
}{\plain \par
}{\plain The destructive effect of inflation is not confined to its =
covert taxing power. That is only its early=20
manifestation. Its later destructiveness lies in its power to amend and =
finally to nullify the contractual=20
relationships upon which the social order depends. }{\plain \b The whole =
philosophy of freedom is written in=20
the single phrase, }{\plain \b\i Power to Contract.}{\plain  p. 44.\par
}{\plain \par
}{\plain \b Private, nonpolitical action alone can provide a true =
monetary system to which the peoples of all=20
lands may turn for self preservation.}{\plain  p. 48.\par
}{\plain \par
}{\plain \b Any sizable group anywhere, any day, could start a =
nonpolitical monetary unit and system.=20
There is no law against it, and no legislation need be invoked.}{\plain  =
The legal tender provision is=20
gratuitous window dressing, for any monetary unit that is not acceptable =
in trade cannot be made so by=20
law and, if acceptable, needs none.}{\plain  p. 49.\par
}{\plain \par
}{\plain Because trade naturally tends to unify and to adopt a single =
monetary language, one of these }{\plain \i [personal=20
enterprise monetary systems] }{\plain systems, through sheer merit, must =
sooner or later become universal}{\plain \i =20
[i.e., become a standard]}{\plain .}{\plain  p. 49.\ul0 \tab \ul0 \tab =
\ul0 \tab \par
}{\plain \par
}{\plain \b To avert the utter and complete disorder of a moneyless =
world, however, such a system must=20
come into being before the present expires through total =
inflation.}{\plain  p. 50.\par
}{\plain \par
}{\plain \b The Valun System}{\plain \par
}{\plain \par
}{\plain \b The function of the banks}{\plain  would be to }{\plain \b =
administer}{\plain , for an appropriate service charge, t}{\plain \b he =
mutual=20
credit of their account holders. }{\plain The banks would provide credit =
facilities for the issuance and=20
redemption of valuns by personal enterprisers }{\plain \b and would =
clear checks}{\plain  and render other appropriate=20
banking services.  }{\plain p. 52.}{\plain \ul0 \tab \ul0 \tab \ul0 \tab =
\ul0 \tab \ul0 \tab \par
}{\plain \par
}{\plain There would, of course, be }{\plain \b no interest charge for =
lines of credit}{\plain , since the banks would take no=20
credit risks. }{\plain \b Traders to one another would extend the =
credit, and the banks would not be involved=20
except as administrators.}{\plain  Hence, under the valun =
system,}{\plain \b  credit would be free}{\plain , but not printing,=20
bookkeeping, insurance and other expenses; service costs would be paid =
for by the account holders}{\plain . p.=20
54.\par
}{\plain \par
}{\plain Credit Limits\par
}{\plain \par
}{\plain How much money might the banks permit each issuer to issue? As =
much as he could redeem, which=20
means, as much as he might need to get a turnover in his business. This, =
admittedly, would vary with=20
different lines. All lines, taken together, average about four turnovers =
a year. Thus, roughly speaking,=20
business would need an issue power sufficient to span three =
months}{\plain .\par
}{\plain }{\plain The ideal issue policy would be that each customer of =
the bank be empowered to purchase equivalent=20
to his capacity to sell and to emit sufficient money within such =
limitation.}{\plain \par
}{\plain \par
}{\plain There is an ideal debit policy, but it may have to be worked =
out by trial and error.}{\plain  p. 55.\par
}{\plain \par
}{\plain \b The best principle can, however, be simply stated thus: Each =
person or corporation is entitled to=20
create as much money, by buying, as he or it is able to redeem by =
selling.}{\plain  p. 95.\par
}{\plain \par
}{\plain Each valun bank would adopt its own credit policy, and it is on =
credit policy that most of the unsolved=20
problems hinge.}{\plain  p. 136.\par
}{\plain \par
}{\plain ... }{\plain exchange can operate only on a trial and error =
basis... It is better to allot too much money power=20
than too little.}{\plain  p. 96.\par
}{\plain \par
}{\plain If those who want money and are willing and able to return =
value to the market for it are restrained=20
from creating that money, the functioning of exchange democracy will be =
impaired.}{\plain  p.65.\par
}{\plain \par
}{\plain \b Idle man hours are a more serious loss than unredeemed =
money}{\plain  and must never be hazarded by=20
overzealously guarding against credit losses. Interrupted production is =
the only loss that is a net loss=20
}{\plain \i [to the community as a whole]}{\plain .}{\plain  }{\plain p. =
101.\par
}{\plain \par
}{\plain Once we have established the principle of debit power }{\plain =
\i [money creating power] }{\plain for all we have=20
released a power for economic stability that does not exist when this =
power is restricted to certain=20
"creditworthy" individuals. The full benefits of }{\plain \b the =
democratization of the money}{\plain  creating power=20
cannot be forecast, but it is plain that this power}{\plain \b  could =
positively prevent depression}{\plain .}{\plain  p. 99.\par
}{\plain \par
}{\plain Launching the Valun System\par
}{\plain \par
}{\plain ... the valun would have an initial value of one dollar, which =
would be equal to the power of the dollar=20
on the day of the valun's launching. Thereafter, it would be entirely =
dissociated from the dollar and=20
independent of any subsequent fluctuations in value that the dollar =
might have.}{\plain  p. 57.\par
}{\plain \i [This is the main point on which Riegel and I disagree. Sure =
the dollar should be the starting point,=20
since that is the value concept that is ingrained in us in the U. S., =
but it is unreasonable to expect that=20
the valun will develop an independent meaning without some help \'96 it =
needs a lever to lift it out of the=20
dollar rut. That, in my opinion, must be some concrete physical =
reference \'96  a commodity or basket of=20
commodities. This would be allow people to simultaneously hold two value =
concepts, the dollar and=20
the valun, and be ever cognizant of the relationship between the two. =
Riegel elaborates on this point in=20
}{\plain Private Enterprise Money}{\plain \i ; I've written a retort =
that will eventually be posted to the web. \'96 t.h.g.]}{\plain \par
}{\plain \tab \tab \tab \tab \tab \tab \tab \tab \tab \tab \tab \tab =
\par
}{\plain \b Existing banks presumably could open valun departments =
without legal difficulty or political=20
embarrassment}{\plain , since under the valun system, they would extend =
no credit and therefore take no=20
risks. Banks would merely administer the credit extended by the account =
holders to one another.}{\plain  p. 57.\par
}{\plain \par
}{\plain The actual launching of the valun might be accomplished by =
enlisting a number of business concerns=20
to pay their bills with }{\plain \i valdol }{\plain checks, which would =
offer the payee the option of accepting payment in=20
valuns or dollars. }{\plain \par
}{\plain \par
}{\plain In}{\plain \b  }{\plain the case of a shortage of either valuns =
or dollars in an account, and there being an adequate balance=20
of the other, the bank would be authorized to sell a sufficient amount =
of the long unit on the money=20
market to offset the deficit in the short unit.}{\plain \par
}{\plain \par
}{\plain It is no more necessary for men generally to understand the =
science of money than it is for them to=20
understand the science of any other utility. }{\plain \b Given a =
sufficient number of traders to participate=20
initially, it will take only a few directing individuals to put the =
system into operation. }{\plain p.61.\par
}{\plain \par
}{\plain To whom shall we look to start the valun? We must look to =
employers, for as we have seen, it is the=20
buyer and not the seller who creates money.}{\plain  }{\plain The common =
man begins his exchange activities by=20
selling his services.}{\plain  p. 68.\par
}{\plain \par
}{\plain \b The first }{\plain \b\i buyer }{\plain \b in the chain of =
exchange is the employer. Therefore we must look to employers to=20
start the valun, and employees have the right to expect it to be =
trustworthy.}{\plain  Employees will=20
repose confidence in what employers profess to be an honest medium of =
exchange, and they will=20
underwrite that medium with the basic commodity, the mother of all =
wealth, namely brain and brawn=20
and sweat. }{\plain \par
}{\plain \par
}{\plain If we distribute buying power adequately, the products of =
industry will be drawn by the buyer rather=20
than having to be pushed by the seller. With the equitable distribution =
of the money power, the=20
distribution of goods and services will no longer be a problem.}{\plain  =
p. 69-70.\par
}{\plain \par
}{\plain ... the unemployed man can do more harm to the economy by not =
buying, than by buying on bank=20
credit, even though his credit remains unliquidated. By the latter =
process, he isolates the germ of=20
unemployment; by the former, he renders it epidemic.}{\plain  \par
}{\plain \par
}{\plain \b Inflation/Deflation}{\plain \par
}{\plain \par
}{\plain \i Boom }{\plain results from an expansion of the genuine money =
supply. This is not inflationary, because it=20
justifies itself by an expansion of production and trade.\par
}{\plain \par
}\pard =
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{\plain \i Inflation, }{\plain on the other hand, is the result of the =
injection of monetary units into the money supply=20
without an offsetting increase of values in the market place.\par
}{\plain \par
}{\plain \i Bust }{\plain results from a reduction of the genuine money =
supply, which is brought about by bankers calling=20
or, as they mature, failing to renew, the "loans" upon which the money =
is based.}{\plain \par
}{\plain \par
}{\plain \i Deflation }{\plain is not to be confused with }{\plain \i =
bust, }{\plain for }{\plain \b there cannot be deflation without prior =
inflation}{\plain . Just=20
as inflation is not an increase in the genuine money supply, so =
deflation is not a reduction. Both are=20
produced by governments. By deficit financing (through borrowing from =
banks) water is injected into=20
the circulation, and by surplus budgets it is extracted, in no wise =
affecting in either operation the=20
substance of the money supply.}{\plain \par
}{\plain \par
}{\plain \b Omnibus Reform}{\plain \par
}{\plain \par
}{\plain \b There are no tyrants among men; there are only tyrannies, =
and the mother of tyrannies is money=20
monopoly.}{\plain  p. 73.\par
}{\plain \fs16 \par
}{\plain Just as the political monetary system trends power toward the =
state, so the system based on true money=20
will release the natural forces that trend society toward private =
initiative, enterprise and democracy.=20
}{\plain \b Pending this fundamental reversal, all resistance to statism =
is futile.}{\plain  As long as the only available=20
monetary system is political, exchange, that process by which the social =
order functions, will never=20
accomplish its natural purpose, the development of prosperity and =
freedom. p. 73.\par
}{\plain \par
}{\plain To rely on education to reverse the present trend toward =
statism shows a want of comprehension of the=20
naturalness of personal enterprise. }{\plain \b No one needs to be =
educated in private initiative and enterprise.}{\plain =20
}{\plain \b These qualities arise spontaneously.}{\plain  }{\plain \b =
All that is needed is that the counterfeiting power of the=20
state, which robs productive effort and rewards parasitism, be =
removed.}{\plain  p. 73.\par
}{\plain \tab \tab \tab \tab \tab \tab \tab \tab \tab \tab \tab \tab =
\tab \par
}{\plain The trouble has arisen from the failure of personal =
enterprisers to provide }{\plain \b a sound monetary system=20
of, by, and for personal enterprise.}{\plain  In their default, the =
state has contrived a socialized system. }{\plain \par
}{\plain \par
}{\plain \b ... reformers almost universally turn to political rather =
than economic means of reform. Thus=20
their reform efforts effected through political action, actually salute =
and strengthen the=20
generator of the evils against which the reforms are directed.}{\plain  =
p. 74\par
}{\plain \par
}{\plain \b The state's profession of being an instrument of democracy =
is pure sham.}{\plain  It is inherently=20
exploitative and autocratic, because it has no means of invoking support =
by appeal to voluntary=20
patronage. It lives by taxation and functions by edict: To regard the =
state as the implement of=20
democracy, when it is itself anti-democratic, is surely the most =
consummate delusion of man.}{\plain  \par
}{\plain \par
}{\plain \b Let us have done with the idea that democracy can reside in, =
or operate through, the state;=20
nothing can be democratic that is not dependent upon voluntary =
patronage.}{\plain  p. 75.\par
}{\plain \par
}{\plain Once the state is denied its power to impose taxes by watering =
the money stream and is confronted=20
with an aggressive personal enterprise movement that will take over =
services for which there is actual=20
demand, its disservices will be recognized as such simply because =
personal enterprise will make no=20
bid for them. Public resistance to taxation will then dispose of =
them.\par
}{\plain \par
}{\plain Exchange, served by a true monetary system, is a constant =
reform mechanism. It is the sifter of=20
proposals and projects, the natural mechanism whereby all undertakings =
are measured for public=20
approval. Its constituency votes early and often, making change and =
progress facile. Served by an=20
unbiased monetary system, it will be the perfect instrument of =
democracy. Here will democracy=20
function, vindicating its ideal. p. 76.\par
}{\plain \par
}{\plain \b ... our whole society is tainted with paternalism. }{\plain =
The blame for the political perversion of the=20
monetary system must be placed upon society. For it has tried to escape =
the task of rationalizing the=20
subject and has thrust the problem upon the Great White Father, who is =
just as ignorant as to what=20
constitutes money but is, of course, glad to grasp power.}{\plain  p. =
153.\par
}{\plain \par
}{\plain The so-called academic or conservative or classical teachers =
and writers are merely different=20
categories of socialists, because they all accept the socialization of =
the monetary system }{\plain \i [i.e., state=20
control of the monetary system.]}{\plain . p. 153.\par
}{\plain \par
}{\plain \b Democracy}{\plain \par
}{\plain \par
}{\plain Human aspirations for freedom can never be gratified as long as =
there is a veto power over self=20
expression, whether imposed by a man on horseback or by means of the =
ballot box.\par
}{\plain \par
}{\plain Yet the democratic state has no means of functioning other than =
by popular elections. That being so,=20
the functions of the state must be limited to those public services =
which are desired by all. Consider=20
the folly of undertaking to express the people's will in all human =
affairs by an occasional election at=20
which, in one confused shout, we sound our yeas and nays on a multitude =
of questions. At the same=20
time, we select representatives to guess what it all means, and to =
divine from it how to execute our=20
will on hundreds of issues that arise after we have given our confused =
"mandate." ... Can we have self-government, and at the same time =
delegate the power to govern? p. 78.\par
}{\plain \par
}{\plain \i [Quoting Arthur Kitson in \'93A Scientific Solution of the =
Money Question,\'94 1894 ...]}{\plain  \'93The issuance of=20
money must be free, in order that industry and commerce may be free; and =
commerce must be free in=20
order that people may be free. Freedom to life necessitates freedom to =
maintain life, and this involves=20
freedom of exchanges. Denial of free money is, therefore, a denial of =
freedom to life.\'94\par
}\pard =
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\tx7920\tx8640\tx9360\tx10080
{\plain It is astounding to me that Kitson, after thinking so clearly =
and fundamentally on money, should have=20
since lapsed into a political money reformer instead of devoting his =
life to promulgating private=20
enterprise money.}{\plain  p. 131.\par
}{\plain \par
}{\plain It is through the preservation and perfection of the monetary =
system that economic democracy will=20
demonstrate its potential for human welfare.... }{\plain \b The =
establishment of a nonpolitical monetary system=20
is but an undertaking in accountancy.}{\plain  p. 80. }{\plain \i [This =
has be amply demonstrated by the emergence of=20
LETS and other mutual credit clearing systems.]}{\plain \par
}{\plain \par
}{\plain \b None will be coerced to participate. None will be =
barred.}{\plain  There will be but one monetary language=20
for the world, and a democratic monetary system will unite people =
everywhere in the universal=20
freedom of exchange.}{\plain  p. 81.\par
}{\plain \par
}{\plain \b New Vistas}{\plain \par
}{\plain \par
}{\plain \f1 Ideas have wings. There is no transportation problem in the =
export of an idea, and one may=20
give an idea without losing it. Both the giver and the receiver are =
benefited if the idea is=20
sound. Let us give the peoples of the world an idea, a liberating idea, =
a constructive idea that=20
involves no sacrifice on our part and no obligation or embarrassment on =
the part of others.}{\plain \par
}{\plain \par
}{\plain \b The authentic approach to realizing man's dream of world =
union is through the vehicle of a=20
nonpolitical monetary system.}{\plain \par
}{\plain \par
}{\plain We are approaching the universal collapse of the political =
monetary system. With such collapse will=20
come revolutions, unless an alternative monetary system shall first come =
into existence. }{\plain \b A true=20
monetary system could avert the chaos and forestall revolution, thereby =
preserving the existing=20
national states even while gradually rendering them harmless.}{\plain  =
For the political monetary system is=20
the principal instrument of state separatism. Once it is gone, all other =
interferences with production=20
and exchange will recede. Denied power over the economy through the-ir =
respective monetary=20
systems, the states will be obliged to abandon their paternalistic pose =
and stand before the people in=20
their true light, as dependents without productive powers, and utterly =
devoid of any powers of largess.=20
The trend of human affairs will then be as irresistibly toward =
individualism and self determination as=20
the present trend is toward socialism and domination by the =
state.}{\plain  p. 84.\par
}{\plain \par
}{\plain Since no social order has heretofore been predicated upon the =
principle of a nonpolitical monetary=20
system, it follows that its promulgation will require a revolution in =
thought and action and that it will=20
be many years before its full implications can be comprehended.}{\plain  =
...When he }{\plain \i [the natural person]}{\plain =20
asserts that the creation of money is within his own powers, he will =
surmount the last major barrier to=20
self advancement and a limitless horizon will open before him.}{\plain  =
p. 85.\par
}{\plain \par
}{\plain I see no need for international relations, and I am sure there =
is no demand for it, except from special=20
interests that have no respect for the rights of others. It is the =
provocateur of war. "A decent respect for=20
the opinions of mankind " dictates that no national government have any =
opinions or policies=20
pertaining to the affairs of other governments or peoples. The =
conscience and culture of one people=20
should be allowed to react directly upon other people without the =
intervention of governments.}{\plain  p. 132.\par
}{\plain \par
}{\plain \b\i From a letter to Mildred Loomis (May 21, 1949)\par
}{\plain \par
}{\plain \b Social reformers are divided into many movements, and each =
has its pro and con. None of these=20
issues can be resolved under the existing political monetary system; =
which frustrates the=20
operation of economic democracy, a process that can operate only by =
means of a true monetary=20
system. If one tenth of the energy expended in attaining ends could be =
consolidated upon=20
realizing the means, the world's problems could be quickly =
solved.}{\plain \par
}{\plain \par
}\pard =
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