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 a 65-year-old vision deserves a close look.
Introduction, comments, and critique by Greco - July 2009.)
sifting through the Riegel papers, I happened to find this
“thirty pound nugget.” It is a summary of Riegel's Valun Money
Plan, which shows very clearly the nature of his proposed system
and the essential details of its operation.
In my estimation,
Riegel’s valun plan is both brilliant and reasonably complete.
It is fully consistent with the values and objectives of the
current movement to transform money and should be very useful to
us today as we try to focus on the main issues and challenges
and come to some consensus on a plan of action.
The most fundamental
purpose of the valun exchanges is to open the money power to the
people at-large and to businesses in particular. The valun
exchanges were to accomplish this by performing the credit
clearing function and by allowing members to overdraw
their accounts, in effect, creating money in the process. It
further intended to create a new money unit or standard value
Riegel, not only
conceived this plan, he also tried to implement it, though with
little success. Given the greater awareness and interest that
prevails today, and the available technologies, we have a much
better chance of succeeding.
There is no
indication of when this draft was written, but comparing it with
Enterprise Money and Riegel's other writings on the valun
program, I conclude that it must have certainly come later,
probably sometime in the late 1940s. It summarizes the main
points that were contained in an article by Riegel that was
published in the November 1945 issue of
The Journal of Accountancy.
That article was titled, Money Is the Language of
Accountancy, and is appended following my summary comments.
Indeed, I venture to say that this draft represents his most
mature thinking on the subject and was probably compiled not
long before his death in 1954.
brilliance, there are a few points here that I disagree with.
Rather than interrupt the rhythm and flow of the original, I
have decided to append my comments at the end instead of
interspersing them at each section. Throughout, I have used
italics to set off my comments from Riegel's. I have bolded a
few of Riegel's words for added emphasis.
Toward the end of
the draft, Riegel, offhandedly states that,
“The project of course encompasses an economic world revolution
and it is difficult to forecast all the consequences.”
INDEED! – t.h.g.
establish a sound money unit with a constant purchasing power
and a money system that will prevent booms and depressions,
inflations and deflations, and assure constant prosperity and
universal circulation, the following plan is proposed.
Name of the Unit
proposed name of the new money unit is valun, a word
compounded from VALue UNit. It will appear in all desired
denominations of bills and coins, and checking accounts will operate
like the present. (I have it from Spencer MacCallum that valun
was pronounced “val-oon.”)
central clearing house through which checks are to be cleared and
from which the currency bills and coins will be obtained will be
called the Valun Exchange.
It Will Start
ideal institutions to start the system are department stores because
their lines of merchandise are so inclusive; and they are well known
to the public. They would not sponsor anything that is not sound and
in the public interest, and with their endorsement the people would
have confidence in the new money.
Forming the Exchange
firms that desired to initiate the system would form themselves into
a Valun Exchange and adopt rules governing the operation thereof.
The members of the Exchange would agree on the line of credit for
percentage of their previous year's business). This means that each
member would be allowed to draw checks in valuns up to the stated
credit limit. Checks would be convertible into currency.
quickly establish public confidence in the new currency, the members
would agree to pay into a pool, one dollar for each valun issued.
This pool would be used to guarantee to any holder of valuns that he
could get dollars in exchange, unit for unit.
the members would announce to the public that they would accept
valuns the same as dollars in their business, or would exchange
dollars for valuns. The effect of this would be to make valuns
acceptable to other tradesmen who are not members of the Exchange.
The currency bills would carry the legend: This bill will be
accepted in exchange for goods and services or for a dollar bill of
the same denomination by the firms whose names are printed on the
of valuns would, of course, be confined to members who had agreed to
the dollar pool. They would write checks for their purchases, and
would cash checks in the regular way for payrolls.
dollar pool would set up cages in the department stores where
dollars would be available to all on demand, in exchange for valuns.
Spread of the System
Because of the dollar pool guarantee, any merchant and employee
would accept valuns and thus there would be many merchants besides
the sponsors who would trade in valuns. No one would, of course, be
obliged to do so, except for competitive reasons. Such dealers could
open checking accounts in the Exchange but would not have credit,
and, of course, would not pay into the dollar pool.
of First Phase
first phase is intended merely to demonstrate the feasibility of the
plan and to win public confidence and to lead to the accomplishment
of the ultimate purpose of the plan, which is to completely separate
the valun from the dollar and all political money units. The time
when this can be accomplished will be automatically determined by
Parting of the Ways
It should be noted that the dollar pool will buy Valuns with dollars
but not dollars with valuns.
In other words, the valun will be guaranteed to not fall below the
dollar, but there is nothing to guarantee the dollar from falling.
In fact, the dollar is sure to fall, and that is the main reason for
starting the valun system — to protect valun users against inflation
and to maintain a constant price level.
outset all goods will be priced the same in dollars and valuns. For
instance, a pair of shoes will be priced $10 and V10. In due course
the inflationary factor in the dollar will cause the dollar price to
rise to say $10.50 but the valun price will remain V10. Thus the
public will discover that the valun is worth $1.05 and will refuse
to exchange one valun for one dollar.
then on the disparity will increase and therefore, the dollar pool
will have served its purpose and may be dissolved and the dollars
and valuns contained therein, returned to the sponsor depositors.
Thereafter the valun and dollar will each be on their own. The valun
will become the storm center to escape the inflation storm and
people will turn to it in self defense.
prices should rise in one unit and not in another, or more in one
than another, may seem puzzling, but that is going on all over the
world. The dollar is the most nearly stable unit in the world.
Therefore, prices are rising in terms of other units more than in
the valun is launched, it will be more stable than the dollar, and
will in fact be the only stable unit in the world. The stability of
a unit is determined by its issue policy. The issue policy of the
valun is that its issuers are solely private enterprisers who issue
it only for purchases of actual values under competitive conditions.
The issue policy of a political unit is that it may be issued for
any purpose by the government including all kinds of non-productive
are billions of dollars issued against no production - hence the
inevitable inflation. Every valun issued will be against actual
value received by the issuer. Thus there will be many more dollars
than valuns bidding for the same goods, with the result that dollars
will decline in power while valuns will remain stable.
Permanent Set Up
permanent organization of the Valun Exchange should include any
person or organization. Membership should be of two classes:
the A members, those who are allowed credit, which means the power
to overdraw the checking account and thus create valuns; the B
members, those who will have the depositing and checking right
without the overdraft right.
proposed that the territory of each Exchange be the state in which
it is located. Any person or company in the world should be eligible
for class B membership in any Exchange but will naturally choose the
nearest, and as membership in any locale justifies, a local Exchange
will be opened. Exchanges would be mutually owned by their members
without capital, acting essentially as central bookkeepers and
National, state and local governments should be admitted as members
of any Exchange but should qualify only as class B members without
the power to create valuns. So far as valuns are concerned,
governments should be obliged to balance their-budgets by denying
them the over-draft power.
There should be one Exchange devoted to international trade to
enable any trader anywhere to draw a check in favor of any trader
This Exchange should be confined to class B membership. Any credit
that an international trader is entitled to would be secured through
some other Exchange and transferred to the International Exchanges
to be drawn against.
International Governing Board
Exchange would have a representative on an International Governing
Board that would determine matters of universal interest and
regulation. Effort should be made to permit each exchange to have
autonomy within proper limits.
most important question upon which men differ is credit policy. The
Governing Board could set what is deemed to be the most conservative
policy and provide therefore a minimum percentage to be charged for
loss insurance, and from there up graduations of more liberal
policies, with appropriate percentages for loss insurance for each.
Exchange could then choose its own credit policy. The appropriate
loss insurance percentage would then be added to the check clearing
charge. Thus members of the various Exchanges would pay more or less
as their policy was more or less conservative.
thus set up against defaults would be held by the Governing Board
subject to draft by any Exchange to cover any loss from credit
contemplated that the expenses of the Exchanges would be borne by
the members through a per check charge for all checks
cleared, thus each would pay in ratio to service received. No
interest charge is contemplated for debit balances and there
would be no loans in the present banking sense, and of course
no notes issued.
currency bills and coins should be printed and minted by the
Governing Board and supplied to Valun Exchanges, so that they would
be uniform the world over.
The project of course encompasses an economic world revolution and
it is difficult to forecast all the consequences. The following is a
catalogue of obvious accomplishments:
stable price level.
debt-money system. Credit would be extended solely upon the ability
to deliver 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; boom and depression
bureaucracy, fascism, and communism by taking the money power from
money control from any quarter.
employment and a high standard of living. Give the people the veto
power over war and government extravagances.
perfecting element in democracy and private enterprise.
commerce in one world of business, in spite of the separatism of
# # #
Comments and Critique
Name of the
I propose that
the unit be called the “Riegel,” in honor of the man who contributed
so much to our understanding of money and exchange. I also like it
because it is a homonym of “Regal” and thus carries with it the
concept of sovereignty. Besides that, I just like the sound of it.
The Dollar Pool
This is a
feature I do not recall seeing in any of Riegel's other materials. I
can see the advantage of it as a way of instilling confidence in the
early stages, but it does pose an additional burden on the issuing
members. Some additional thought and discussion is needed on this.
Parting of the
example, he presumes that the dollar will continue to be debased
while the valun will hold its value in terms of real goods and
services. I agree, however, since the valun system will for some
time be more limited, people may be willing to exchange some valuns
for depreciated dollars because of the dollars wider ranging
If inflation of
dollar prices were to accelerate, however, which is very likely at
some point in the future, people would begin flocking to the valun
system because its superiority would become more obvious.
throughout his work, speaks in favor of an “abstract value unit,”
and his valun is presumably the implementation of that thinking. He
expects that the valun and the dollar will in a short time part
company. I myself cannot see how that will happen without a lot of
help. A value concept gets established in the minds of people
through its use.
are well accustomed to using the dollar value concept, what will it
take to lift them out of the “rut” of dollar thinking and onto the
high ground of valun thinking except some physical reference which
allows them to compare the two side by side? In my view, any new
value concept must be defined in concrete physical terms if it is to
have any hope of separating from the established value concept,
thus, my oft repeated advocacy of a “market basket” standard.
how an index number, like the consumer price index, works – you take
a basket of commodities (and services) and compare their total
dollar cost today with their dollar cost at some time in the past.
Now, if you take the reciprocal of that index number, you get the
value of the dollar in terms of goods and services. My proposal is
to define the new unit (valun) as a specified amount of some
specified commodities. Then, there would always be a clear
distinction between the value of a dollar and the value of a valun.
So far as
governments are concerned, Riegel would limit them to class B
membership, i.e., he would deny them the overdraft (issuing)
privilege. I am inclined to be a bit less strict. I, too, have
serious objections to governments forcing people to accept both
their services and disservices, and would prefer that such services
be required to stand the test of competitive markets. But that is
something that can only partially be dealt with through the monetary
realm. Legal tender laws obliterate any objective definition of
the value measurement unit and must be repealed.
We are seeking
an alternative exchange mechanism to the present centralized
government-banking dollar system, which enables unlimited
monetization of federal government debt. Surely, the federal
government must not be allowed to do that in an alternative
system, but I think the purpose of dispersal of power will be served
by allowing lower levels of government to monetize a portion of
their anticipated tax revenues.
As long as
taxes are with us, I am willing to allow lower levels of government
to use them as a basis of issue. There must, of course, be limits on
the amount so monetized, just as there are limits on the amounts
allowed to private businesses. Local, municipal, and perhaps even
state governments should be allowed overdraft (money creation)
privileges so long as the same credit limit criteria are applied to
them, as to the private business members.
provisos, I think we have here a very good plan. It remains to adapt
it using today's technologies and to promulgate it to a wide
audience. – t.h.g.