Money Is the Language of
By E. C. Riegel
(For more than 29
years, monetary expert Thomas H. Greco, Jr., has been working at
the leading edge of economic and financial restructuring. He
believes the following 65-year-old vision deserves a close look.
Greco - July 2009.)
Proceeding from the assumption that the study and comprehension of
money is an integral part of accountancy, this author explains his
own conception of the function of money and credit, proposes the
establishment of a “private-enterprise money” system, outlines Us
operation, and lists some of the advantages which he believes would
result from the point of view of accountants, in particular, and the
national welfare. Mr. Riegel, who is president of the Valun
Institute in New York, describes himself as “a non-academic student
of credit and money.” He is the author of several books, including a
recent volume entitled
Private Enterprise Money,
which develops the proposal outlined in this article. (Thomas H.
Since money is the language of accountancy, an unstable unit plagues
the accountant with a confusion of tongues. This year’s statement is
written in a tongue different from last year’s and perhaps even last
month’s. Figures are not merely black and red; they are also gray
and pink. Taxes are impossible of estimation because when the
government runs a deficit there is a hidden tax that manifests
itself in inflation.
Depreciation cannot be gauged because property may show appreciation
in terms of the changing dollar. Profit-and-loss figures are
deceptive. Reserves may depreciate or appreciate in terms of the
unit. All is confusion. Is accountancy futile?
problem is serious enough to challenge the profession. If it is not
solved accountancy must suffer. If accountants master the problem
the profession will be raised to new levels of prestige in the
business world. The study and comprehension of money is an integral
part of accountancy and must not be left to the voodooism of
Money can best be understood by inquiring into the purpose of it. In
simple or whole barter there is no need of money. When barter is to
be split into halves, i.e., one trader is to receive full
satisfaction in value, and the other is to receive only a promise of
value, there arises the need of an accounting system and money is a
system of split-barter accounting.
is essential to remember that in the process of trading by means of
money, there is no departure from barter, but merely a facilitation
of barter by splitting it into two parts, one half finished and the
other half prospective. Values still continue to exchange for values
with money acting as an interim device, but itself having no value.
Perhaps the easiest way to comprehend money is to imagine ourselves
in a position where we had to initiate a system that would enable us
to escape from the rigidity of whole barter to the flexibility of
split barter. Let us approach the problem as one purely of
accountancy, completely divorced from politics.
problem would be one of providing the means whereby trader #1 could
receive value from trader #2 by the former giving the latter an
order for an equal value which order would be acceptable to any
trader at any time. An IOU would not be sufficient; it must be
converted into a WeOU. In other words there must be a conversion
from private credit to composite credit underwritten by all the
participants in the trading circle.
Obviously, this calls for a pact of all the traders agreeing to
honor the promises of each as if issued by all. Mutual or social or
composite credit is, therefore, the foundation of a money system and
the device that liberates traders from the limitations of whole
Before such common agreement can be obtained two questions must be
determined: (a) what is the promise of each that is to be credited
by all? (b) what is the limit of such promises? In other words we
must define the meaning of the credit and the limit of it. Since the
purpose of money is to split barter in two parts with one trader
receiving value and the other “holding the bag,” it is obvious that
the money must issue from the former (the buyer) and must pledge not
money but value and the buyer-issuer promises to deliver value when
any money is tendered to him from whatever quarter.
Thus we see that the essence of credit under a true money system is
not to promise to pay money but a promise to receive money. To
comprehend this is to liberate private enterprise from the control
to the limit of the credit of each participant, this can be agreed
upon on the basis of the needs of various trades, and industries,
and professions rather than passing upon the applications of each
member thereof. This being done, each participant would be
authorized to draw checks against his assigned credit without giving
any note or other instrument. The credit would have no term but
would be in the nature of a call credit since the pledge is to
deliver value on demand by tender of money.
Realizing that we have a mutual credit agreement whereunder the
credit can be offset only by delivering value (selling goods or
services), it is obvious that we cannot afford to admit to our money
exchange as a money issuer any factor that is not engaged in the
business of buying and selling. Ipso facto governments are excluded
since they have no way of making good their promise which is
implicit in the issue power.
This explodes the delusion that governments back money. It is only
private enterprisers that back money; governments merely depreciate
it by freely issuing it but never backing it by over-the-counter
Establishing a Monetary Unit
Before we can give meaning to our agreements we must determine the
size or power of the money unit. This may seem formidable but is
quite simple. Few people realize that our dollar was given its
meaning by merely making it par with the Spanish dollar already
current in the colonies and the states. Thus we can agree that our
unit (I suggest the name “valun” from VALue UNit) shall be equal to
the current dollar or some multiple thereof and set our prices in
Having agreed upon the three essentials: (a) the definition of the
credit, (b) the extent of the credit, (c) the size of the unit, we
are ready to set up a clearing house through which our bookkeeping
can operate and to provide the means of covering its expenses. This
latter can be accomplished by the simple device of a check-clearing
charge. No investment is needed, the Exchange being able to equip
itself on credit based upon its prospective income from
Exchange itself would have no money-issuing power but could draw
only upon accrued income. To provide currency in bills and coins
would be very simple. The Exchange would purchase the bills and
coins and they would be subject to requisition by members by cashing
a check. Such requisition would bring a debit to the account of the
check writer and a credit to the account of “the currency
deposit of currency would, of course, bring the reverse action. The
cost of printing the currency and minting the coins could be charged
to each drawer or thrown into overhead and covered by the
check-clearing charge just like the cost of printing check books.
These are the general outlines of the establishment and operation of
a private-enterprise money system. For details I must refer the
reader to my book, Private Enterprise Money. Since the
substance of the whole plan is mutual credit there is no occasion
for anybody to pay interest to anybody and, of course, there is no
place for the promissory note.
Check drafts and deposits are the only instruments of record and the
“money-makes-money” principle is absent. Money is made the
instrumentality of the private profit system but of itself is
valueless and profitless. This revolution has tremendous
significance in the issue between private enterprise and
collectivism because the criticism of the former is due entirely to
reason a private-enterprise money system assures stability of the
unit and gives definite meaning to accountancy is that no units will
be issued except for value received since each trader in
self-defense must restrict his issue to selfish purposes. There
could be no issues for boondoggling, or relief, or subsidy, or war,
because the government would have no issue power. There could be no
inflation or its reflex, deflation.
This does not imply that the government could not carry out any
project that the taxpayer approved, but it does mean that such
approval would be necessary since the taxpayer would be the sole
source of money and the government would be powerless to tax by the
deficit process of changing the power of the unit through inflation.
In brief, we would have government of government—democracy at last.
private-enterprise money system would accomplish the following:
stable price level.
debt-money system. Credit would be extended solely on the promise to
pay with goods and services.
interest within the system.
money-creating power out of the hands of government and banks and
place it in the hands of private enterprisers.
government operate on a cash basis; prevent deferred and delusive
taxes through inflation.
distribution of goods by distributing money power.
inflation and deflation.
bureaucracy, fascism, and communism by taking the money power from
hidden money control from any quarter.
full employment and a high standard of living.
people the veto power over war and all government extravagances.
perfecting element in democracy and private enterprise.
the accounting profession will interest itself in the establishment
of a true money system it will render an incomparable service to
business and the public. The study of the subject is not
extra-curricular; it is part and parcel of accountancy. No
profession can gain so much from its solution; none must suffer so
much from its non-solution.
reconversion problem with which the nation is now engaged is
basically a problem of dollar-power conversion from the prewar power
to the current power. By rationing and restraints upon spending, the
action of demand upon supply has been cushioned.
This cushion must be removed and since there are now about eighteen
available dollars for each dollar of consumer goods (at 1939 prices)
we face a tremendous potential inflationary price rise. If through
the self-restraint of the people, or by artificial restraints
imposed by government, the accumulated dollars are not permitted to
come into the market, industry will stagnate and relief and
public-works payments will increase the unbalance between a dollars
When the flood breaks prices will skyrocket into runaway inflation.
The dollar must be converted, sooner or later, from its prewar power
to its natural current power which will grow progressively smaller
and I believe will not be arrested short of complete fade-out.
creation of a private-enterprise money unit is, therefore,
imperative if we are to escape chaos and bloodshed. The subject is
one of greatest urgency and I hope that the accountants will
actively participate in the project.
This article was
The Journal of Accountancy, November 1945, pp. 358-360. (Official
Publication of the American Institute of Accountants).
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