Spencer Heath Archive

Item 2326

Carbon of program of a monetary conference held at the Foundation for Economic Education (FEE), Irvington-on-Hudson, New York, September 9, 1952. Appended to the original is Riegel’s four-page fold-out, “The Approaching Monetary Crisis.” See also Item 2327.

 

 

 

MONETARY CONFERENCE

 

          PARTICIPANTS

 

     Several of the staff of

 

         FOUNDATION FOR ECONOMIC EDUCATION, Inc.

 

   and

 

       E.C. RIEGEL, SPENCER HEATH and IVAN FIRTH

     

      of

 

 VALUN INSTITUTE FOR MONETARY RESEARCH

     

      Held at

 

       Irvington-on-Hudson, N. Y.

 

   9 SEPTEMBER 1952

 

                  ______________

___

 

 

             AGENDA

                    

(Prepared by Valun Institute)

      

      Part One    The Theory of Money

      Part Two    The Valun Universal Money System

 

 Part One

              THE THEORY

1. THE PURPOSE OF MONEY

 

The purpose of money is to facilitate and expand exchange and thus to permit and induce greater production.

 

2. THE METHOD OF ACCOMPLISHING THE PURPOSE

 

The purpose of money is accomplished by splitting barter in two halves to permit a time element to enter between performance of the first half and the second. During this, a money credit is passed from trader to trader until it reaches a prospective customer for the issuer of the money credit.

 

In deferring the reciprocal half of the exchange and linking the two halves by a series of exchanges, there is no departure from the equity of barter, nor does the money medium acquire any value. It is consumed in the accomplishment of its purpose.

3. SOURCE OF MONEY

 

Since the purpose of money is to facilitate trade by means of an interim money credit between the performance of the seller and the buyer, and, since only a trader is (by the necessity of his position) obliged to bid for money with his goods or services — and thus act as a money redeemer — he alone is qualified to issue money.

 

 Money is issued by a trader drawing on his allotted credit with the authorized money-credit administrator, for the purchase of values. Thus there can enter into the circula-tion only such units of money as have been justified by the bargaining of the issuer and the acceptor, with the former obliged, in turn, to offset his demand for goods with his demand for money. Thus money can enter the circulation only through exchange for bargained value and can be retired. Its issue is vindicated only by the same process.

4. THE MONEY SYSTEM

  

The money system requires a a central bookkeeper and drawing power administrator (hereinafter called BANK) — through whose ledger the circulation of debits and credits revolves.

 

5. MONEY INSTRUMENTS

 

The primary money instrument is the check-draft drawn against an account at the bank.

 

 If drawn against a drawing power allotted by the bank and exchanged for value, it constitutes a MONEY ISSUE. If drawn against an earned credit, IT DOES NOT. Check-drafts are convertible into currency — paper and coins — by making them (the checks) payable to the bank.

 

 Though the currency bears the name of a bank or the money system, its AUTHOR is the CHECK WRITER, whose check requisitioned it.

 

 Neither the bank nor the money system has any power to issue money in any form.

 

6. DETERMINING THE MONEY UNIT

 

All accounting in a money system must be in terms of value unit.

 

 Such unit may be the equivalent of the value of any common commodity (or group of commodities) at the time of the unit’s adoption — but abstracted therefrom.

 

 Since all commodities are, under the exchange process, con­stantly subject to change in relative value, there can be no association between the money unit and any commodity.

 

 The money unit, like the key note in orchestration, is merely the beginning point or precedent for bargaining in its name.

 

Because any existing money unit represents value, it may      be used to key-note a new money unit.

7. STABILITY OF THE UNIT

The stability and soundness of a money unit depends upon the stability and fidelity of the policy governing its issue. Issuance of spurious units into the sound money circulation, dilutes the sound money. Because this watered-down money unit is called by the same name, traders do not realize that they are, in fact, trading on the basis of a new, false and deceptive unit. This causes much confusion, inequity, social conflict and unrest.

 

 Since every issue of true money justifies itself, there can be no excessive supply of money.

 

7. INDISPENSABILITY OF COMPETITION

 

Money is an implement of freedom and a product of freedom. The social order functions through voluntary exchange. The stability of the money unit can he maintained only by the free bidding for money and commodities. Therefore, competition is an essential of a money system.

 

 Any restraint upon competition is an impairment of money and retards social progress.

8. THE SOCIALIZATION PROCESS

 

This process begins by robbing the economy through the money system. This is perpetrated by the State issuing spurious money units — it is impossible for it to issue genuine money, (see paragraphs C 1 & 2), — into the circulation, thus taxing by an unseen hand while distributing largess ostentatiously. This creates illusions such as the Welfare State and the economic value of war.

 

 Diluting the money brings diminishing returns. It exhausts the economy. Social unrest results. Police power is increasingly resorted to, liberty declining in tempo. Thus the Welfare State culminates in the Police State.

9. CONCLUSION

     

The socialization process, beginning with the State-controlled money system, is but like begetting like, for the money system is, in fact, socialized or nationalized; it is entirely isolated from the purifying influence of competition.

 

 Since the idea that the control of the money system should be invested by the State has become universal, we see that the progress of socialism is not only the result of socialist ideology, since the socialized money system is supported also by anti-socialists. There has, therefore, been no real issue, in practice, between those who cheer the growth of socialism and those who lament and profess to oppose it. ALL ARE MONETARY SOCIALISTS.

 

 The utter ignorance of and acceptance of traditional ideas by the public on the State’s power of perversion

through the money system, is shared by the politician. The enlightenment brought by this study discloses no rogues or malicious planners. It offers to the State,

as well as the economy, escape from the perversion that falls on both.

 

 Both political measures and economic movements are frustrated by the political money-power obsession that afflicts society. Its release from this bondage will bring peaceful solutions of many problems.

 

 The hope of preserving the private enterprise system and the democratic State lies in the establishment of a non-political money system, to which all friends of the free social order should be devoted.

 

 With such objectives attained, the money system — having no political boundaries — will become, ipso facto, univ­ersal, thus uniting society on the economic plane, re­gardless of political divisions.

 

 

Part Two

 

THE VALUN UNIVERSAL MONEY SYSTEM

 

                        

                         Foreword

 

Pursuing the theory of money as stated in Part One, the VALUN SYSTEM offers solutions for the two problems involved.

 

THE FIRST PROBLEM

 

To determine the most cohesive, yet flexible, plan for a universal exchange unit.

 

 In the solution of this problem, it was necessary to confine the built-in principles to those deemed indispensable, and to leave to experience and the process of competition the selection of the best operating policies and details.

 

 The built-in principles are these:

 

1. All governments are excluded from the issue power.

This principle, being basic to the whole thesis, needs no elaboration.

   

2. The power to convert check-drafts into currency shall be unlimited.

 

The distinction between currency money and check money that exists in the political money system has put a purely gratuitous hazard in the banking business by limiting the bank’s ability to supply currency adequate to any demand that may be made upon it by valid check drafts. This is blamed for the recurring bank crises, when bank runs forced banks either to resort to clearing house certificates — or fail, although they were perfectly solvent but for the arbitrary distinction between currency and checks.

 

 This idea that currency is a higher form of money is a logical outgrowth of the fallacy that the imprimatur of the State lends fidel­ity – whereas we now know that it is just the reverse. There must be no double standard for money in the non-political money system.

THE SECOND PROBLEM

 

TO determine the most practical plan for switching business from the political money units to the new non-political unit.

 

 The solution of this problem will, we believe, be found in the use of the new OPTI-UNIT check form, which will be described later.

NO LEGISLATION

 

A non-political money system having, so far as we know, never been proposed, there is, therefore, no legislation against it and, hence, none to be repealed.

 

 Since the system relies solely upon voluntary participation, no legislation is, of course, to be enacted.

 

 

(Turn to Page 2 of brochure, 2nd paragraph and after.)

 

 

 

 

  The Approaching Monetary Crisis

 

 WORLD REVOLUTION IS IN PROGRESS.

The challenge is neither political nor military; it is monetary. Money, man’s most essential utility, has been used and misused without comprehension of the law governing its issue.

This law ordains that to be genuine —

(VALun UNit)

MONEY must spring from a private enterpriser who, by the necessity of his dependence upon money income from sales, is obliged to bid for it by the tender of goods and services in the open market, thus balancing his supply of money with his demand therefor, and maintaining the stability of the money unit.

GOVERNMENTS depend upon taxes for income. Therefore, they are under no necessity of bidding for money in the open market with tender of goods or services, as are private enterprisers. Hence they are utterly disqualified to issue money, and their professed money issues are spurious and the cause of destabilization and inflation.

Ignorance, not dishonesty, on the part of statesmen and the people has led the governments of the world to pursue the most insidious practice of issuing spurious money units into the money circulation, blindly believing that statutory law could grant to the state a power that is denied it by natural monetary law.

In recent years, this practice has expanded tremendously by the process of check issues against bank “loans”, which makes the issues much less obvious than by printing currency. Now that the evil has been so greatly enlarged, the abuse threatens the entire money system and compels man to comprehend money and its laws, if he would avert the disaster of complete collapse of the world’s political money system before a non-political money system is in being.

When we realize that money springs only from trade (the two-way street of buying and selling), and that govern­ment issues are created only to buy (a one-way street), it follows that such issues increase the number of money units in circulation without a corresponding creation of wealth.

THIS IS INFLATION. This is the challenge involved in the world revolution now in progress. We are now in the phase of the decline of the old order, and the VALUN SYSTEM is the herald of the new.

PROMULGATED BY

VALUN INSTITUTE for Monetary Research  226 East 26^th Street – New York 10, N.Y. – MU 6-4675

 

 

The Valun Universal Money System

 

The Valun Universal Money System is designed to project a universal money unit and operating system. Since it will be disassociated from all political sponsorship, it will not be foreign to any nation, and thus will be potentially uni­versal in operation. It undertakes to provide business with a sound, stable money and credit system that will supply ade­quate money media. It will make possible the liquidation of all the world’s inflated money units into the Valun, and thus avert the calamity of total inflation and complete breakdown of exchange.

 

ORGANIZATION

 

THE BOARD OF GOVERNORS OF THE VALUN SYSTEM will be the supreme authority from which licenses to operate the system will be issued to banks, regardless of nationality or the money unit in which they now transact their business. Valun banking will require merely a separate set of books. The operating licenses will stipulate rules of prac­tice and provide for periodical examinations.

 

MUTUAL OWNERSHIP

 

The Valun System will be conducted on the mutual participation basis. The banks will pay stipulated fees into the Board of Governers, and the surplus accruing therefrom will be, in turn, divided among the participating banks pro rata to their volume of Valun business—probably check clearances being the criterion. Voting power will be similarly held by the banks. Bank stocks being held by private enterprisers, the whole money system will thus be truly of, by and for private enterprise—with political participation completely excluded. This will give private enterprise a truly strong bulwark against socialization.

 

CREDIT POLICY

Each bank will adopt and pursue its own credit policy under an insurance agreement whereunder a base, or mini­mum, premium rate will be charged, subject to increase according to its loss or charge-off experience. The Board will stipulate the conditions for loan charge-offs. Under this arrangement, all Valuns issued through all banks will be of equal validity, since the insurance rate will compensate for all charge-offs through the bank’s passing the insurance cost into its charges for services. Thus, no matter how many banks are authorizing the issuance of valuns, nor where their borrower-issuers may be, nor what type, there can be no variations in Valuns the world over.

CHECKS NOW—CURRENCY LATER

There will be no need for Valun currency at the beginning, as all existing currencies will be purchasable with Valun checks at the going rate of exchange. Once a true money criterion is established, all existing currencies will be usable at the current discount. When these currencies become so depreciated as to be inconvenient to use, Valun currency in bills and coins will be made available. Valun currency will be uniform the world over, bearing the authorization of the Board of Governors and available from banks on check requisition.

 

LAUNCHING THE VALUN

The Valun will be keynoted by the dollar at the dollar’s power on the day of the Valun’s launching—but entirely disassociated. The launching is to be accomplished by enlisting a number of business concerns to pay their bills with Val-dol checks, which offer the payee the option of accepting payment in an equal number of Valuns, or dollars, or half in both. The purpose of this is to establish parity for the initial Valun issues, and it is expected that sufficient accept­ances will be had, so that, thenceforward, there will be a money exchange market for Valuns in dollars, and that this market will start the Valun off on a premium basis. After this, the free money market will be the guide to the value of the respective units, which will thereafter govern the number of Valuns required to pay for bills rendered in dollars.

 

VAL-DOL ACCOUNTS

The participating banks will open Val-dol accounts upon request, against which the holders may draw Val-dol checks. The Val-dol account will honor the payee’s preference of payment in either Valuns or dollars, or both. In case of shortage in the account of either Valuns or dollars, and there be adequate balance of the other, the bank will be authorized to sell the long unit on the money market sufficient to provide the deficit in the short unit.

 

• |      Acc’t No. .

Check No. I

Pay to……….

In payment of

Val-Dol Account

(Name   and   address   of   bank)

V-….

..Valuns

.Dollars

or y₂ °f each

.195..

Payee’s Preference

V……………

 

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