Tuesday, September 29, 2009

Principles In Liberty 45

E. C. Reigal - Chapter 4 and wrap up.


Recorded on 9/29/2009

00:45 The money power of men.
00:53 Competition is the only means for determining value.
01:30 Two different kinds of credit: commercial and money issuance.
01:48 Commercial credit is more structured.
02:!4 Issuance credit does not need moral responsability but instead capacity to produce.
02:43 Money is so needed that people will work hard for the issuance loan to be returned.
03:13 Issuers must have a red-ink credit ballance to be qualified to issue.
04:30 Clarification of what red-ink balance means.
05:00 Money springs from those who have none, not by the aristocracy.
05:40 Employers vs Employees as issuers compared.
06:49 Labor is the sole basis for value of all commodities.
07:38 Money circles increase societal organization and productivity. The more circles the better.
08:19 Potential issuers are who we want to issue.
09:10 Each man is his own employer.
09:38 Two money misconceptions: Government needs to be involved and that only the wealthy are qualified to issue.
10:12 We must use our tallent to invent a monetary system that allows this idea to work.
10:30 Government calls us consumers but we are the producers.
10:55 Key concept: recognise the dignity of man in ecconomics.
11:15 Never prevent the individual from being able to cast the money ballot.
11:20 If we do this the political democracy will dissolve while the Personal Enterprise System unifies man into better and more productivity.
12:02 Neither electors nor elected can possibly understand the ecconomy.
12:20 A free money system will let individual money votes direct productivity in a more fair and efficient way.
12:50 This is the new approach to freedom.
12:55 My comments...
13:40 Problems with Reigel's ideas for issuance.
14:00 How do you get this issuance into circulation in a way that promotes production?
15:10 Those who don't have money tend to be the least efficient producers.
17:20 Year of Jubilee idea.
18:19 The idea of charity as an ecconomic stimulant.

A New Approach to Freedom - Concept by Concept
E. C. Reigel – Concept by Concept
This is a summary of E. C. Reigel’s “New Approach to Freedom” idea by idea.
• Self Preservation is the first law of nature.
• Capitalism and Private Enterprise are the primary tools of self preservation.
• Because of this, “Personal Enterprise” is the tool used by everyone in society to survive.
• All Profit, consumption, and enterprise are personal.
• Personal Enterprise is motivated by self gain.
• The State is but an inefficient means to self gain. The idea that the state can really help in the personal enterprise process is a delusion.
• Selfishness is not Greed. Greed seeks unfair gain while selfishness motivates productivity.
• Selfishness is refined over time and eventually begins to look like unselfishness.
• Selfishness is the sublime law of being.
• Intelligent selfishness requires the cooperation of others.
• To get cooperation one must give it.
• To give cooperation one must develop oneself morally and spiritually.
• Society began with the principle “to each according to his ability”.
• Cooperation ability derives from having excess to give.
• Cooperation is expressed by exchange.
• Promotion of exchange promotes economic and social advancement.
• Inhibition of exchange is anti-social.
• Exchange development marks the level of civilization.
• The state has historically caused the most interference with exchange.
• Barter is primitive exchange.
• The invention of money removes the limitations of barter.
• The secret of productivity is specialization of labor.
• A product’s value is determined by its salability or exchangeability.
• Thus production is regulated by demand.
• Ignorance of the concept of money can diminish the ability to exchange.
• Personal Enterprise is cooperative and social because to work it must satisfy the wants and needs of others.
• The most intelligently selfish individual is the most socially minded, productive, and creative.
• Competition is the enforcer of the natural law of personal enterprise.
• Buyers and sellers in competition establish the values of services and products.
• Competition compels better cooperation.
• Unfair/dishonest competitors are defeated by honest ones.
• Exchange that operates under the freest competition is best.
• The composite will of those who trade reflects the highest judgment in society.
• In a money system, competition determines the value of the money.
• The personal enterprise system consists of exchange, competition, and specialization of labor. This system comes from natural law, not from man.
• Violation of the natural laws of the personal enterprise system, such as monopoly or price restrictions will inevitably result in loss to the violator if not thwarted by the state.
• Competition brings about economic democratic balloting in a way that does not limit or harm the minority.
• Competition benefits society by restraining greed and thus sustains progress.
• Men do not (cannot) think socially but (must think) individually.
• Competition enforces cooperation and governs the individual away from self-destruction.
• Man is naturally governed by his peers which constitutes natural government.
• Natural government (by competition) is:
o Taxless.
o Pays dividends to society by advancing it.
o Governs by:
 Positive Good
 Negatively by diminishing good through reaction to unpopular conduct.
• Man cannot enjoy life without the cooperation of others.
• Loss of cooperation is a stronger deterrent than any penalty.
• There is no appeal to social exclusion.
• The personal enterprise system cannot be improved by man – it is naturally perfect.
• The personal enterprise system (PES) has always been the victim of political planners. We have never seen a time when this system really worked unhindered.
• Men are motivated by selfishness to constantly increase the efficiency of production.
• This same selfishness tempts men to take the production of others.
• The law of competition governs man away from theft of production. (how?)
• Competition is world government – it operates universally.
• Competition is liked by buyers.
• Competition is disliked by sellers.
• Employees tend to be more buyer than sellers because they only sell their labor infrequently for a job.
• Employers tend to be more sellers because they buy labor and goods less frequently than they sell goods or services.
• The (natural) law breaker tends to find his escape from the enforcer of competition via the state – which is (ostensibly) the upholder of law and order.
• The state is in fact the enemy of free exchange, as it lives by thwarting it.
• The state interferes with the personal enterprise system via:
o Taxes.
o Patents.
o Licenses.
o Subsidies.
o Tariffs.
o Preferential treatment.
o Monetary control. (!!!)
• Thus the state establishes and maintains monopolies.
• The state attracts lobbyists and special interest pleaders.
• When enough elements of society follow the special interests, the personal enterprise system eventually becomes paralyzed and dictatorship and social decay results.
• The process is insidious because:
o Sellers tend to utilize the state to conspire against competition.
o Organized groups within society tend to garner votes and supply money which the politician looks to for election.
o Political democracies actually function by the will of organized minorities rather than by the majority.
o Attacks to the PES are done with the pretense of aiding it.
o The state deflects blame to business.
o The state posses as a friend of freedom and the PES.
o The state stigmatizes black markets which are the ones successfully thwarting the states attempts to control the PES.
o The concentration of power in the state attracts the very elements that would conspire to pervert its function to their unnatural goals.
• There appears to be no safeguard against this insidious operation but to drastically curb the power of the state.
• Self government is the antithesis of state government. Power surrendered by one is granted to the other.
• Man has not yet devised a system that permits full self government.
• The natural government of man is the free market.
• The common concept of the free market is that it is purely materialistic and devoid of moral restraint.
• The free market is the most spiritual agenda possible to contrive.
• The free market or PES is the only system that would enforce the golden rule.
• Every enactment of a political law means the repeal of a natural law.
• Realization of this fact by society is how the trend to statism is reversed.
• The most effective method the state has to stop the citizen from governing government is the money power.
• When the money ballot is thwarted, the political ballot becomes a farce and is no defense against tyranny.
• A people who cannot distinguish between money created by the state and money created by the PES cannot govern themselves.
• Freedom is the ability to exchange.
• Exchange -> productivity -> wealth -> social intercourse -> freedom.
• Constitutions do not create freedom. They merely bind the state to allow freedom to be pursued by the PES.
• Exchange is the method by which production is digested by society.
• If the state gains power over the PES sufficiently, devolution of society results.
• The danger of this is real because economic distortions get blamed on business and the state is viewed as the cure – when in fact it is the cause.
• The PES has no ideology.
• The state often uses ideology to justify its cures.
• That which opposes the PES opposes freedom.
• Civilization began with barter.
• Barter limits exchange by requiring both parties to symmetrically hold that which the other desires at some time and place.
• Common commodities were soon used to supplement exchange by barter. This increased the odds that an exchange could take place.
• Precious metals became the most efficient commodities to support barter.
• Next arrived promises to deliver the metals, removing the need to carry the metals to do business.
• The use of promises allowed the trading parties to separate the exchange into two halves that were independent in time and place.
• Promises introduced the element of faith.
• Because money is so sorely needed, people have accepted promises as money and have exposed themselves to fraud.
• Money and Credit (trust in a promise to deliver a commodity) are two different things.
• Using money does not supplant barter. It merely separates exchanges into multiple parts.
• Faith is the basis of the power to issue money.
• Man must understand money so he can know who’s issuances to trust.
• For money to function is must be protected from false issuers.
• Specialization of labor is needed to facilitate exchange.
• Cooperative organization is needed to specialize.
• Money divides barter into multiple pieces, allowing for the creation of multiple circles of circulation.
• Money ties men together into complex cooperative groups.
• Each man or group only chooses who to buy and sell with and otherwise concentrates on personal productivity.
• Money does not circulate indefinitely.
• Money retirement happens when the issuing bank loan is paid off.
• Money circulation lifespan can vary greatly.
• Money organizes true competitors and eliminates those who fail to compete.
• Money converts man from a creature at the mercy of nature into a collective cooperative operating on individual free will choice, which creates a “social will” that moves society ever higher and releases spontaneous invention, discovery, recreation and artistic expression.
• The word money has two meanings:
o The instrument that manifests the concept of money.
o The Concept itself – the idea of split barter trading springing from a debt and returned by an offsetting credit of wealth produced.
• Money may be in the form of a check which specifies the receiver, or it may take the form of currency which is valid for any user.
• Money instruments need not have any intrinsic value.
• Banks act as money bookkeepers and process transfers between trading accounts.
• The bank records are a reflection of the book records of the traders themselves.
• Banks do not issue money – they merely allow traders to do so.
• The trader must initiate money issuance by writing a check thus incurring a debt.
• The trader’s check may be to a specific person or an order for currency.
• Currency is a transformation of a demand by a trader made to a bank.
• Banks effectively certify the credit of the issuer.
• The Bank receives a check from the trader to transfer liability for the currency from the bank to the trader.
• Banks cannot, by themselves, issue currency of loan money.
• Banks do not loan capital, surplus or depositors funds.
• Banks merely authorize the borrower to increase the money supply.
• The currency may bear the name of the bank or government but it is still the issue of the writer of the check/promise that backs it.
• Money permits value to be disconnected from a commodity/service to facilitate exchange.
• Coins, though useful for making change and holding intrinsic value, are nevertheless no more valuable than currency. Their intrinsic value merely ties them closer to whole barter.
• A commodity can never act as money because the purpose of money is to escape the limitations of whole barter.
• Money is expressed in terms of an abstract unit of value.
• The true value of the abstract unit is established by actual trade of that unit.
• No law or authority can give a value to a monetary unit.
• Money is an obligation expressed in terms of a value unit and issued by a buyer in exchange for value from a seller. It is transferable and acceptable to other sellers for equivalent value, and is ultimately redeemed for equivalent value by the issuer.
• A monetary system requires:
o Limitation of issue power
o Competition
• Our current state run system does not meet these requirements and therefore what we call money is not – by our definition.
o The state has no limit of issue
o The state has no productivity to back up its issuance.
• The state is engaged in counterfeiting but its crime is much more serious than that of normal counterfeiters because its issue cannot be distinguished from legitimate issue and can thus never be removed from circulation.
• Counterfeiting reduces the value of each monetary unit – ie. It causes inflation.
• The whole money supply includes:
o Commercial bank accounts
o Savings bank accounts
o Currency in circulation
• Only (counterfeited) money that comes into actual circulation effects prices because only it is subject to competition.
• Buyer panic could result in counterfeited currency suddenly coming into circulation, resulting is rapid inflation which promotes more panic.
• When the state issues a large amount of counterfeited money, it defers reaction by inducing people to “save”.
• The state establishes counterfeit money circulation by comingling its issues with that of legitimate private issues (loans).
• Mock money issues:
o Taxes the people covertly
o Extracts goods and services from the economy using worthless paper.
o Disturbs exchange by causing the money unit to undergo frequent changes, making long term agreements more risky.
• Government counterfeiting results in a parade of interests flocking to government for what appears to be in inexhaustible fountain of cash but which is actually robbing the productive segment of society to pay for the desires of the most corrupt.
• To hide the consequences, government resorts to price controls which dry up supply and brings in more government control too keep things flowing.
• Politicians use the money power to buy elections and favors. The temporary stimulus given to business by spending gives the politician time to hide once the consequences of his actions become apparent.
• The money power allows governments to wage war without having to consult the public first.
• Eventually, the PES is demoralized and gets blamed for the problem. Government then assumes the means of production and becomes the full tyrant.
• Government “service” is a misnomer because what government “trades” in taxes for its services is mandatory. There is no competition and thus no way to value its services to determine if its taxes are fair.
• When government uses the money power to tax people, it appears to be a supplier of wealth and a benefit to the economy, when in fact it is stealing and hurting the economy at the same time.
• The state, regardless of what people think, is the agent of exploitative groups who invoke it to thwart the operation of natural laws.
• Even a global federation of nations would change nothing as long as the money power was still in place. It continues to be a focal point for special interest exploitation.
• World government already exists on the economic plane.
• Wars are the result of government’s war against the PES.
• Each state destabilizes its own monetary unit, thus impeding not only intra-state exchange but inter-state exchange as well.
• Once a unified system, completely free of all governments, exists to facilitate global exchange, it will act as such a unifying power that wars will become a thing of the past.
• Such a system is possible without the enactment of any laws. Merely the absence of laws would allow it to take over.
• Since there are no laws prohibiting such a system, it is up to us to simply implement one.
• We need a universal monetary language that:
o Has no national complexion
o Has no political complexion.
o Is available to enterprisers in all parts of the world.
• Once in existence, such a system will naturally attract participants by self-interest.
• Transactions within this system will diminish those within the political systems.
• Eventually political moneys will be abolished. All this comes from freedom of choice.
• Competition is required to assure money acceptors that the value is equivalent to what it was at the time of surrender.
• Individual issuer credibility is handled by the bank-issuer relationship and becomes unimportant in the big picture.
• This obviates the need for only the wealthy to be issuers.
• Commercial credit:
o This is a loan of money from a bank’s deposits.
o Derived from a promise to deliver money or goods to the creditor.
o Defaultable by nature. It’s a gamble on the part of the bank.
o More rigidly structured.
o Stipulates a specific creditor and date of maturity.
o Usually backed by loan collateral.
• Money creating credit:
o Created by a demand for cash by a bank certified producer.
o Not subject to intentional default.
o Issuer wants his money (by selling his commodity/service).
o (I don’t get exactly how issuer’s can’t default and how they can get a loan with a negative balance. It might be that when an issuer issues money he does not receive the money to spend it – but I can’t see how that works either. The issue must be spent into circulation or somehow given away.)
• The qualifier of an issuer is his capacity to deliver value to the market.
• The need of money precedes issuance.
• To issue money, an issuer must first establish a red ink balance with the bank.
• Employee (labor providing) issuers are less speculative than Employer (goods providing) issuers because labor is the common commodity needed for all production.
• All money is service money.
• Man’s labor is the natural fountain of all money.
• By humanizing the issuance of money we provide more circles of money flow to organize society.
• No producer should be dependent upon other’s money circles.
• When a producer finds himself outside all circles, it serves society for him to issue money to create his own circle so he can produce.
• Issuing money allows the issuer to buy which absorbs materialized labor and creates demand for more.
• When we buy from others we indirectly buy from ourselves (if we are a producer).
• Every man is his own employer and must be allowed to buy the production of others.
• This is a check against unemployment and depression.
• Money misconceptions:
o Government is allowed to issue but it does not produce.
o Producers are not allowed to issue, yet are naturally qualified to do so.
• The key concept in creating a good monetary system is recognizing the dignity of man as the producer of the means of exchange.
• Producer issued money becomes a sacred monetary ballot which will eventually confine the state to its proper activities.
• Political democracy is a snare when applied to economics.
• Neither the elector nor the elected can understand the complex interactions of forces in an economy.
• In a monetary democracy, the elector gets to cast his ballot frequently and subjectively from his own perspective as he pursues happiness. The minority are not shut out in such a system.
• A monetary democracy is the New Approach to Freedom


Mike said...

Thanks for this. Most people pronounce Riegel's name a bit different than you have done on your podcast. I look forward working with you if you should decide to continue on from here with his work.

Mike said...


I hope you know I am no in any way attacking you. You say/admit on your blog/podcast that "you are not sure how this (Riegel system) works". The “fatal" :"big" flaws" you assume to have identified are not so and are stemming from your lack of understanding him. As you assume from your reading there is some “bank” alluded to in Riegel’s 4th chapter and that assumption is totally incorrect. You will be wise to read more than one chapter before making further commentary. People are not borrowing anything from anyone other than themselves individually ant then collectively by participation in a mutual credit clearing circle.. Riegel advocates paying/spending/issuing money into circulation buy way of making purchases in the marketplace. And subsequently redeeming that same value by rendering it back to the marketplace. The red balance is from a non-bank account at a central book keeper.

Sandy Staab said...

By private email I told Mike:

An excellent reference! Thanks.
But unfortunately I am still confused after reading this chapter.

I am trying to get this in a form anyone (even me) can understand by example.
So here's an example - let me know if I need correction here.

Joe is broke and down on his luck. He is hungry as well.
Joe goes to the central bookkeeper (CBK) to get a currency-creation loan.
Joe gets the loan because his lack of cash shows us that the money supply is insufficient for Joe's needs.
The CBK issues a loan for $1000 to Joe as requested. Joe is given cash which indicates what he owes to the CBK.
Joe spends the cash at the grocery store. The cash has value not because of work Joe has done but because the CBK has covered this credit.
The grocer doesn't need the cash but wants to install some more shelves in his store so he purchases it with Joes cash.
The shelve supplier takes the cash and deposits it to the CBK to offset his balance with the CBK.
Joe still owes the CBK $1000 and needs to produce something to pay it back.
Joe offers to mow his neighbors lawn for a year for $1000.
When Joe is paid, he uses the cash to pay off the CBK loan.

Is this correct?
If not, could you correct this example or give me one I can understand?
If so, what is the motive for Joe to ever pay off his balance with the CBK?
Would there be some limit to how much Joe can borrow to create cash? How is that regulated?

Mike replied to me:
Stanford Try more reading as i can not take further time for you on this.

My response to that is:
You took the time to tell me I was messed up but you don't have the time to answer my specific problem which I described in this podcast and wrote to you by example in email. If you really understand Reigel, you should be able to easily help me with my confusion here.
This confusion is why I did such extensive study of this one article - it didn't make sense to me and I have spent MANY HOURS trying to understand this. I am not going to invest more time in reading his books if you can't simply point out what I am missing.


Sandy Staab said...

To Mikes credit he did respond to me with this:
Again. There are no loans! Specifically (unless it is decided that the system is to be backed by cash for such losses) nothing. Just the golden rule, a chance to prove to ones self and others that they will be responsible, self governing and an accounting record of individuals credits and debits for all else to see. They only get one chance and would be limited in the total amount the could go into the red. Don't you believe we should trust people?

To which I responded:

Thanks Mike for the response - I do appreciate it!!!

I didn't catch from what I had read that Reigel meant to have the accounting records public - that is a good thing.
I also didn't read anything of Reigel's about people only getting one chance or a limit to how much could be borrowed but this makes sense as well. However such a limit would limit the money supply and I am not sure Reigel would agree with it but the system should work by making each unit of credit more valuable over time as wealth is produced. (IE this would force deflation over time unless population grew equally with wealth.)

Do I trust people? This is probably the point I still mainly disagree with volunteer society people on - I don't believe the human condition is naturally good, but is instead bent on evil because I subscribe to a biblical world view. Thus I don't trust people - I trust God. I thus don't believe force can be done away with, but like the founding fathers, I believe force is sometimes necessary to stop evil and that power needs to be separated as much as possible so that the use of force is not abused by people (who are naturally evil). I do trust specific people who's reputations I know but only as far as I need to. Trust in each other is an absolute necessity for a people to function collectively but it is historically rarely given or received without evidence to support it except by fools.