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The Freedom Of Exchange Is The Foundation Of All Freedoms - Part I

Thomas Greco, whom we have quoted from time to time in this report, wrote something a few years ago about the work of E.C. Riegel:

�Throughout my career as a monetary transformer, I have drawn heavily upon the profound and insightful writings of Riegel (1878-1954). I�ve learned more about money from him than from any other source.

�Riegel left a great legacy of writings and correspondence which would have been lost to us, except for the fact that Spencer MacCallum happened to meet him a year before his death and recognized the greatness of his work.

�As I�ve said before...Why go prospecting when we�ve found the mother lode? Riegel�s material is the mother lode of monetary truth.�

The following introduction and article about E.C. Riegel are by Christopher M. Quigley,, Mr. Quigley holds a Bachelor Degree in Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He actively trades utilizing the principles set out in the modules of the Wealthbuilder course, which has been developed over the last 9 years as a result of research, study, experience and successful application.


In a life spanning over 70 years one of the greatest students of money and its meaning was the American E.C. Riegel. Many regarded him as a genius for his understanding of the nature and functioning of money as a human and social institution. This essay is an introduction to his main ideas on this subject as increasingly people are beginning to realise the need for a more stable monetary unit. In essence, in his book �Flight From Inflation� he identified money as the mathematics of value and argued that for a democracy to thrive the �money power� must be free.

Part I

He (Riegel) basically viewed any political economic monetary system as socialist. For this reason he was at odds with Adam Smith's view of the world. Indeed he felt that Smith in his Wealth Of Nations pre-empted Marx as a social theorist. Regardless of his views, Riegel has come to be respected for his unswerving belief in mankind and his heroic efforts to champion practical freedom based on the realities of exchange systems based on value.

The freedom of exchange is the foundation of all freedoms, and the freedom of exchange unencumbered is the truest democratic freedom of mankind. Civilization began with exchange and exchange began with whole barter, i.e. things traded for things. The first improvement on whole barter was indirect barter. This was the practice of utilizing commodities of common use as reserves to be later traded for items of immediate need.

The adoption of precious metals, such as gold and silver developed this trend. This step reflected a growing emphasis upon facility in exchange. Accordingly, through the passage of time a new means of completing transactions arose through the practice of depositing precious metals with goldsmiths, who in turn issued warehouse receipts. Such pieces of paper became negotiable through custom, and so purchases could be effected by their transfer.

Acceptance of negotiable gold receipts, i.e. promises of future delivery, marked the first real step toward the utilization of money. It was at this point that barter was finally fully split into two halves, with the buyer receiving value and the seller receiving only a claim. This was the first faint glimpse of the tremendous liberating power of money. We can also see that the ideal of money is to split barter absolutely in half, without any limitations imposed upon the seller.

Hence we realise that money is a device that operates within the trading community for that community's own self-interest. The necessity of splitting barter into halves in order to motivate trade is the motivating force: sellers want to sell and buyers want to buy.

Money is issued by a buyer. Such a money issuer, however, must in exchange for the goods and services he buys from the market, place other goods or services into the market. Thus money as a money instrument is evidence of a purchase that is issued by a purchaser to the seller. Therefore money is actually backed by the value surrendered by the seller and potentially backed by a value in the possession of the next seller.

To print bills and mint coins is not to issue or create money. This has no more monetary significance than if you were to write a cheque and leave it in your chequebook. Instruments that have not been put into exchange are non-existent in the world of exchange and money. Money simply does not exist until it has been successfully accepted in exchange.

Hence 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 other seller, it will be acknowledged that money springs from mutual interest and co-operation among traders and not from authority.

It is a fallacy to think that a government can issue money. Money can be issued only by a buyer for himself, and he must in turn be a competitive seller to recapture it and thus complete the cycle. This competitive co-operation for goods and services creating value in the market is actually what makes money work.

This competitive situation, in which the trader redeems his original monetary issue, through the sale of his own goods and services assumes that the community's money will maintain its stability. All enigma as to what causes money to circulate and maintain its power is thus dissolved by comprehending this natural law of money issue.

This law states that the legitimate issue of money is confined to personal enterprisers in the market place, since they alone, by the logic of their situation, are able issuers of value. Thus in essence: money is issued by a purchaser but it must be issued by a purchaser who can and is prepared to issue value; it is a tradesman's agreement to carry on split barter among themselves.

We thus see that money is the mathematics of value exchanged based on mutual agreement. The monetary instrument is but the evidence of the consummated trade. It is a mistake to attribute purchasing power to the instrument, for it has none. It is merely the conduit through which purchasing power flows; such purchasing power lying in the commodities or values exchanged. From this analysis we can deduce that commercial banks do not �lend� money. They in fact permit the �borrower� to issue money.

Flight From Inflation The Monetary Alternative, by E.C. Riegel.
Edited by Spencer Heath MacCallum & George Morton.
The Heather Foundation of Los Angeles, California

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