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Beyond The Limits Of Cash or Credit

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The Freedom Of Exchange Is The Foundation Of All Freedoms

Part II

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, www.wealthbuilder.ie, 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.

Once given permission, the borrower now has the legal authorization to write cheques to the extent of the loan and tender them in trade. Upon their acceptance by a seller, who in fact provides value, new money has come into existence. This money remains in circulation until such time as the borrower, through becoming a seller, recaptures money with which to liquidate the loan.

From the premise of the natural law of money issue it must be accepted that governments cannot qualify as issuers because they are not in the real situation of personal enterprisers. They cannot qualify as they do not barter. They do not bid for money in the marketplace. Their taxing power relieves them entirely from selling. They take 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, regardless of any statutory laws intended to validate it.

From this failure to discriminate, between money issued through bank credit by personal enterprisers and by governments, has come an inflationary mixture of true and false money that will eventually threaten social order. Money cannot be issued in perpetuity by man-made laws; it operates by its own natural law. To ignore this law invites uncontrolled inflation.

The destructive force of inflation is not confined to its covert taxing power. This is only its early manifestation. Its later destructiveness lies in its power to amend and finally to nullify the contractual relationship upon which the social order depends.

The whole philosophy of freedom is written in the single phrase, power to contract. While a small distortion of the unit of account impairs contracts previously written, a consistent inflation actually destroys all existing contracts and prevents the making on new ones.

Adam Smith in his political economy allocated the money power to the state, thus he anteceded Marx as a socialist. It is his followers, unconscious socialists, and not those of Marx, who constitute the greatest peril to the order of free exchange.

The Smith philosophy is taught in all the schools and colleges. Students become indoctrinated by this ideology unaware that in its monetary concept it is contrary to the true philosophy of personal enterprise and individuality. An unnatural monetary system begets unnatural economic manifestations. How can a free economy work with the monetary system socialised? Rampant inflation makes a mockery of any true accounting for any true contract.

When the future businessman discovers that his pride in cash was delusion and a snare; that his cash reserves which he meant to freeze has melted and evaporated; that his balances might have been preserved if they had been cast into materials; that his bonds and money claims on others have shrunken and that he might have profited had he known enough to get into debt; that his tax refunds are far less in power than those paid in; that he must pay capital gains taxes on what are actually losses...then that businessman will realise that the whole contemporary inflationary accounting picture is a delusion.

Thus we must realise that ideally the monetary unit that is the unit of account, if it is to be of value, must be stable.

If money is issued under the natural law of issue, unit stability will be in evidence. Under natural law if exchange plays no tricks on us, we are all really working for ourselves. We will all be interested in stability. In reality we are all buying for ourselves; we are all selling for ourselves. But just exactly what is it we are buying and selling? In the final analysis, it is simply human energy, mental and physical.

Labour is the basic or virgin commodity. It has no quality of obsolescence for it is always associated with the latest and therefore the timeliest products. It is the only value. Others have comprehended this.

From the premise, that all value is labour and that since money is based on value, they have reached the correct conclusion that money must be in actual fact labour. However the fatal error that labour money planners have made is that they set a measure of labour, such as an hour, as a unit of value.

While it is true that labour, both physical and mental is the only value, and therefore the sole commodity that passes through exchange, it does not follow that all labour is of equal value. Labour may be so unintelligently applied that it is completely worthless. We are all labourers and therefore fountains of wealth, because we all emit human energy.

We must however direct that energy to meet the demands of our fellow labourers. By the measure to which we successfully respond to this demand will our energy be valued. Money is not a measure of value, it is a method of stating a value that has already been determined through exchange.

Thus if money is ultimately the mathematics of value set by exchange, what is value? Value is the relationship of desire. It is arrived at in the mind by comparing one thing with another. Thus, what actually takes place in trading is the determination of values and this mental process is the act of �moneyizing.� It is a mathematical process.

As the act of �moneyizing� is psychological, so the act of �monetizing� is material. It of course should be noted that both arise out of and do not antecede exchange. Hence trade produces money; money cannot produce or induce trade. Trade, like money, is a social phenomenon based on mutual co-operation and interest.

In conclusion, value mathematically compared is money. The purpose, however, of a monetary medium is to isolate value accountancy from value itself, so that a sum of value may find its equivalent anywhere and not be related to specific things, all of which are constantly changing in their value content. That orientation is the quantity wherewith money accomplishes its high purpose of emancipating trade from barter.

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 re-questioning power upon all free from government influence and therefore insulated from political inflation.


�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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