The Festival of Grassroots Economics was last Saturday in Oakland, organized by JASecon. I think it was a big success and so I congratulate Bernard Marszalek, Rick Simon, Heather Young and many others who worked hard at making this event a reality.

There were several remarkable things to this event. First, it was truly completely grassroots, organized by activists, non-profit workers, coop workers and related professional, and with them presenting. Second, it was free for all, which is sadly rare for an event dedicated to change. Last, it was organized in the beautiful setting of the Humanist Hall in Oakland with colorful decor and quotes on the walls such as “The world is my country, to do good is my religion” – Thomas Paine.

Many interesting ideas were discussed but I think the most interesting and realistic one related to small business local investing: how can small business, even coops can open their capital without spending a fortune and staying true to their values, instead of getting in debt, and ultimately how do we realize the vision of a small business local stock exchange. How can people take Warren Buffet “invest in what you understand” literally, and sell their mutual funds invested in large corporations such as McDonald’s and instead invest in funds that invest in businesses they know and shop at.

Behind all the discussions, I think the main theme was: how do we give small businesses and ultimately worker-owners the same tools that large corporations enjoy? how do we use the system to change the system?

The panel on the various styles of coops was particularly enlightening to me: some coops do not allocate shares democratically, but are run democratically, others provide each employee with the same number of shares when they start working, some others (big ones) hire professional managers with a separate compensation package, etc. The common thread though is that responsibility and decision-making is shared equally between all employees.

In a later fun discussion on leveraging legal loophole (which one may call “legal hacks”), a lawyer discussed how a coop can use preferred shares to open the capital, while keeping all voting rights. Another good legal hack is for a non-profit to create a for-profit subsidiary to reap the solar panel tax benefits reserved for for-profit companies.

One thing I missed at this event: art/play as an engine of economic renewal.

In a recent twit, I said:

Continuing debt reduction implies conventional money will buy less of what we really want and more of what we don’t need.

I agree this is a bit cryptic, so I wanted to explain myself.

By debt reduction, I mean people either paying their debt down or walking away from their debt or having their debt being official forgotten. To understand what I mean you must understand that money is fundamentally about power: power to get people who want money to do whatever those with money want. Many people have this power and many others want what these people have. But not everyone can have power over everyone else. Certainly, it is not very motivating to realize that you will never ever get any of that power, while others get it by playing in the market casinos. So attitudes are changing and people will carry less and less debt. This is why I say: as debt is repaid or written off or not paid at all, there is less money in the system, hence less power to get others to do whatever we want. To get others to do something for us, in particular to care about us, money will be increasingly not enough, instead we will have to prove to them that we have done something of value to someone or something that they care about. This is why I say: “money will buy less of what we really want”. What we want is to be acknowledged, to belong, to be cared for, to be loved. All kinds of things money will buy less and less if deflation continues, and to me, this is a good thing.

On the other hand, because we live in such a productive economy, we have a potential for more abundance of what everybody needs for everyone. I am convinced we can thrive, feed everyone, lodge everyone, entertain everyone, etc. In other words, all these things we don’t need in excess (but are produced in excess and maintained in artificial scarcity). This is what I mean when I say that money will buy more of what we don’t need.

What will motivate people to do their best? because they will do what they love to do most and because they will know how well they do by getting acknowledged by those they care about for it on their social network or the whole Web.

So to conclude, I’m not too preoccupied with the concerns of the investment community whose is fundamentally scrambling to determine how to preserve the power of the wealthy. Having some savings myself, I was concerned like everyone else but my intuition tells me that there is not much one can do: anyone with anything that resembles idle money will lose some power in this deflationary process, and from that standpoint I agree with inflationists who worry about lost purchasing power. Equities, cash, gold, bonds, etc. will matter less and less until a balance between the market economy and the gift, reputation-based economy is found. The Web is deflationary and there is nothing we can do against its force. Aside from a diversified portfolio of assets, what one with assets really have to do is to put these to work while they have value to others to help change the system for the better, doing what they do best for the people and the things they truly care about.

Society prefers money to its children

[...] This financial crisis is just one of several lights that turned red [...] I don’t see any place in our living space that isn’t in a crisis as deep as the one you mention in the financial and economic world.

[...] Are you aware of the collapse of knowledge. We don’t teach latin or greek, poetry or literature. The teaching of science is collapsing everywhere.

[...] Philosophers are guilty. They have missed the magnitude of changes in the world. [...] I see all institutions are true dinosaurs.

[...] Our relation to our planet is a one of terrorism. We are currently winning this war against the world, that is to say that we are losing it.

[...] I’d like to talk to you about why dinosaurs disappeared. We love to discuss the reasons why they died. But it’s very simple: they disappeared because they were growing. It’s their size that killed them. Life cannot exceed a certain size. We die of growth. [...] Romans were victim of their greatness. The size of the Roman empire had become so big that it could only collapse. [...] In the history of sciences, we see that there are topics that are a center of gravity at a given time. Before it was mechanics, tomorrow it will be life sciences. Tomorrow, the economy will be centered around life sciences, not mechanics.

[...] All the laws that we want to do with copyrights on the Internet are a joke. The Internet is a space without any Law. In this space without Law, a new kind of Law must emerge. In the world of tomorrow, a new type of Law must emerge. If you want to regulate the world of today with old Law, you will fail, just like we did on the Internet.

[...] (We need a contract with Earth) That’s what I meant when I wrote Le Contrat Naturel. (I cannnot imagine an international organization writing this new Law). I remember a discussion with the previous UN Secretary Boutros Boutros-Ghali. He was telling me that every time he talks about water, everyone tells me that they are not here to talk about water but to fight for the interests of the country they represent. As long as there will be intergovernmental organizations, the Earth will not be represented. [...] We discuss fishing quotas while fishes are disappearing. Fishes do not have the right to speak. I am for this utopia that fishes would have a right to speak. I want a world institution that represent water, earth, fire… life. We need scientists who swear not to represent a country, an ideology, a corporation… and who represent fishes, air and water. International institutions are populated with dinosaurs.

what will most likely emerge as the most powerful currency in the economy of engagement? Emotion. The economy of engagement is also an economy of feelings, in which positive emotions—pride, curiosity, love, and feeling smart—are the ultimate reward for participation.

Emotional Goals of Players

Economist Edward Castranova, who studies massively multiplayer online games [...] argues that most players turn to games specifically to produce the emotional high associated with accomplishing something concrete, feeling capable, and being recognized for their successes.

[...]

Shirky, too, confirms that the pleasures of accomplishment and the feeling of competence are basic drivers of participation in online communities.

[...]
PARC researcher and MMO expert Nick Yee discovered three primary motivations for MMO participation:

• achievement, the desire to advance in the game’s hierarchy, master its mechanics, and compete against other participants;
• social, the desire to have positive interactions with other people and work toward a common goal together;
• and immersion, the desire to exercise imagination, consume compelling content, and think about something other than ordinary, everyday wor

Here are two books that I’ve read that relate to this:

• Rules of play
• Flow, the Psychology of Optimal experience

Mobile technology makes the real world a massive real-time multi-player play ground. This is a unique opportunity to move away from “work and no play” or from the “this for that” of traditional money, towards motivating people to spontaneously provide good experiences, and collectively evolve towards more indirect forms of reciprocity.

Questions Answered:

1. Do achievement badges influence behavior more than monetary rewards?
2. Do people donate more when their donations are publicized to their social networks?
3. Will gifts be taxable?
4. Is scarcity a myth?
5. Can supply and demand be matched in better ways than through the market?
6. What motivates people to do good?
7. How does traditional money play along with new forms of social recognition?
8. How do we avoid social capital bankruptcy?
9. Are reputation based systems necessarily following a power law distribution?
10. Can we avoid the tragedy of the commons by relying less on money?

First of all, it reminded me of an interview of Douglas Rushkoff about his latest book Life Inc where he tells the story of how Middle Age cathedrals were built:

The Vatican and central Rome did NOT build the cathedrals. The funds came from local currency. They were what we would now call “demurrage” currencies that were earned into existence. Towns ended up creating more value than they knew what to do with! They started investing in their infrastructure and their windmills and their water wheels; and also in their future in the form of cathedrals and other tourist attractions.

The second thought I have had recently is that a currency is a unit of contribution to a common goal, and it is this common goal that gives the value to the currency, because the common goal provides a social incentive for everyone to participate in their own way, some by contributing directly to the common goal and being issued currency, others by contributing indirectly to the goal by accepting it for goods/services. In my view, individuals’ common goals or common individual goals are what initially create community, more than anything else.

A public art piece like the Singin-Ringing Tree is such a common goal. It creates long-term value for local businesses like the cathedrals of the middle-age. It creates identity and pride for the local population. It also create jobs.

One approach to funding art is to seek grants from tax-funded government development agencies, but this approach can be viewed as quite inefficient since it requires tax collection, projects competing for funding with other projects, and a hierarchical and highly centralized decision making process.

Another approach could be to use a community currency dedicated to the particular art project. It would work like this:

• The art project would issue acknowledgments for in-kind or monetary donations made to the project. Issuance would be made public.
• Businesses could show their support by accepting some of these acknowledgments for partial payment of goods/services they provide.
• The notes, if printed in paper, could bear an artist rendering of the public art piece to be built.
• After it is built, the public art piece would likely attract tourists to whom the notes could be sold as a “piece” of the art piece, likely for many times the face value in dollar, since originals would be in limited supplies. This would provide a natural way for the currency to disappear from circulation, and be replaced by new ones for new projects.

My personal talk was centered on the inefficiencies of the market processes at creating sustainable abundance and happiness for all, and how mobile Internet technology ability to track our day to day accomplishments and advertise them in our social networks will provide new currencies that will allow those who give a lot to find their needs supported (and more), thus encouraging more people to focus on what they do best and give it away, rather than working for money at an alienating job that they might lose at any time.

My notes:

• Mathew presented a model of trust as concentric networks, with the core circle as most trust-worthy in which a gift economy operates, and outside of this circle the rest of the world, the global economy with global currencies. For Mathew, there is little in between and this is where an intermediate concentric network must emerge with a mix of gift economy with a bit of accounting/reputation and local currencies with less influence of global market forces. He gave as an example the Village Network currency systems, which operate both as a gift-economy and mutual credit currency. He explained that in this system, everything starts with the expression of a need by a member, that others are offering to satisfy (ex. need a ride to the airport), rather than by a marketplaces of products/services offered that can be shopped for.
• We discussed how deeply unsatisfactory exchanges can be, compared to authentic gifts: “billing for necessities makes me feel really bad”, earning $1500 in a WE for a wedding you don’t want to be at, having to asks patients or students for money knowing they don’t have it. Binal Shah of Karma Clinic shared with us in a small group how she provides healthcare to patients on a gift economy basis. Here is what she says to her patients: “What I provided you is worth way more than you can possibly pay for it so I’m going to give it to you”. She simply trusts that the ripple effects of her gifts will come back to her and satisfy her needs. Another attendee, who is an educator, as well as Mathew mentioned how he provides a service on a sliding scale basis, but with a commitment to always says “Yes” even if the patient cannot pay the full price, sustaining their activity by the generous contributions of some clients that allow them to provide service for free to others.
• Someone mentioned how existing platforms such as CouchSurfing could be extended to provide housing and foor for people volunteering (not just for CS, but any volunteering). This is in line with some ideas I introduced in my talk.
• Anthony Di Franco summarized a discussion by saying that our perception of scarcity is a self-realizing phenomena and that we must find ways to change this perception to a perception of abundance, which in turn will entice people to give more.

Other names mentioned I heard for the first time:

• The Green Society and their complementary currency.
• Damanhur

Many people in the community currency business are very keen to put more distance between the forms of money that they devise, the forms of association they are inventing, and the ones with which we are the most familiar and that leads often to quite sectarian struggles over the definition of the relation between the currency and the national currency, whether it should be multiple issuer/member/subscription supplied or supplied from a central fund, whether it should take the form of hours or some kind of currency, whether it should take a scrip form or be entire virtual, and so on, and these things often become a matter of intense debate leading to a kind of sectarian struggle in the movement, which is comparable only in my experience, with that of Trotskyist movement, or the early christians, or the puritans, people who are willing to break up an organization on a matter of principle. And as we learnt in the last session, the problem is less how can new community currency organizations generate themselves on a standalone basis, but how can they be coordinated as part of a wide movement and integrated more effectively into commerce more generally.

Here’s how it would work:

• Alt-transportation users would log their shared rides/bicycle rides/walks using a service like RideSpring, which may provide rideshare matching service. From these logs as well as the type of car that would be used otherwise, carbon emission savings would be computed. Certification might involve a mutual process or a device such as the Freiker or the Zap tracking devices for walkers/bicyclists. Users with would be able to withdraw these carbon offset certificates as printed stickers with a barcode.
• Non-alt transportation users buy carbon offsets certificates issued in proportion to the carbon emissions saved by the tracked usage of alternative transportation. This certificates would be valid for a year and issued as bumper stickers that buyers can proudly stick on their car.
• Businesses would accept payment of their products/services in part with the carbon offset certificate stickers.
• In addition, thanks to the recent Commuter Bicycle Benefit bill, bicycling commuters riding at least 3 times a week would be able to get $20 pre-tax income every month from their employers in the form of additional carbon offset dollars (that could only be spent at bicyclist shops).
• The overall system would be operating by a non-profit charity with a specific additional mission of lobbying for additional tax breaks, in particular for ride sharers not using vanpools.

I need to do the maths, but in the meantime, would love to hear what you think.

There is an interesting parallel here with the Twollars RT syntax: RT 2 twollars @giyom for …

I don’t know exactly how Twollars accounts for ReTweeter being ReTweted (Eiso?), but I like the idea of qualifying a ReTweet.

I see two ways to qualify it:

• a number, positive or negative, indicating how much I like something or not (although the negative number may not be practical)
• a hashtag or something similar, further qualifying my number. (BTW, I noticed that people like to add tags to the things they RT, but it’s not clear to receivers whether these were tags in the original tweet, or the RT only)

Examples:

• Liking the Tweet: RT 2 @giyom … same as RT +2 @giyom same as RT ++ @giyom
• Not liking the Tweet: RT -1 @giyom … same as RT – @giyom
  
• Liking the Tweet for a specific aspect: RT 2 #fun @giyom …
• In addition, a regular RT like RT @giyom would be accounted as +1

Note in the last example that the hastag is before the RTed username, which allows the receiver to see that the hastag was added by the RTer.

A tracker may keep track of balances for each Twitter user, like Twollars or Twitbank does.

While I was on tour in western Canada recently, I had occasion to meet Paul Grignon, creator of the excellent videos, Money as Debt I and II. Paul came to my presentation on Salt Spring Island and brought with him a new short video called The Essence of Money, a Medieval Tale. In less than eight minutes, this video explains as well as anything I’ve seen how simple and effective a community-created currency can be. Highly recommended! View it here.

My speaking tour of the west coast began with the Economics of Peace conference in Sonoma, California, and continued with stops in Portland, Seattle, Salt Spring Island, BC, Whidbey Island, and Vashon Island, Washington. Most of these have been recorded and will eventually be posted.

My Seattle presentation at Elliott Bay Bookstore is available for viewing now. It was video-recorded by Todd Boyle who has inserted the slide graphics and posted it on vimeo. I’ve added a link to it on the sidebar to the right under My Audio-visual Presentations.

Congressman Ron Paul tells the truth about the Federal Reserve and its power to evade Congressional oversight. Watch it here.

Richard C. Cook’s review of my book, The End of Money and the Future of Civilization, combines some of my main points with his own insightful observations, and has stirred up a lot of interest. Besides appearing on his own website, the review has been picked up by a number of others, including Global Research, The Market Oracle, Dandelion Salad, After Downing Street, Snuffy Smith’s Blog, and Disident Voice.

Cook’s own work is worth following closely. He a former federal government analyst who writes on public policy issues. His website is www.richardccook.com. His latest book is We Hold These Truths: The Hope of Monetary Reform (Tendril Press, 2009). His career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. He also taught history at the Field School in Washington, D.C., and owned and operated an organic farm for 10 years while commuting to work from rural Virginia.

That’s the title of Michael Moore’s latest film.

If I were intent on finding fault with it, I might say that the film understates the case, or that there are huge gaps in the story it tells. But I prefer to focus on what the film is rather than what it isn’t. This film is, quite simply, a masterpiece; Moore’s best film ever. Every American, indeed, everyone in the world, should see it. It should be translated into every language in the world. It should be the focus of study groups, and stimulate community action across the country. –t.h.g.

On October 6, the British newspaper, The Independent, dropped a bombshell by publishing an article by long-time middle-east correspondent Robert Fisk, called The demise of the dollar. Fisk reported that:

… Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

Eamon Javers of Politico.com is now raising questions about Fisk and the underlying motivations for publishing such an article at this particular time (Whodunit? Sneak attack on U.S. dollar).

With the current uneasiness about the global financial situation and ongoing concern about the weakness of the dollar, markets can easily be manipulated using stories such as this in mass circulation media. I will not speculate about the reasons or the truthfulness of Fisk’s report, but the handwriting is clearly on the wall. The days of dollar dominance are over. The financial powers-that-be know that, and you can be sure they have a plan. The successor to the dollar is already being readied for prime-time, but will the emerging economies accept it? That is the question. — t.h.g.

In one of his recent updates, Congressman Ron Paul says, “An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law.” You can listen to it here.

IMS is one of the leading trade exchange operators in the United States. It’s a publicly traded company that has in about 24 years grown from one local trade exchange into a network of more than a dozen trade exchanges scattered around North America. The IMS website contains a five minute video that does a pretty good job of explaining how commercial trade exchanges work. View it here.

A Primer on E.C. Riegel by Spencer H. MacCallum

With a Comment by Thomas H. Greco, Jr.

This article by Spencer MacCallum is a nice summary of Riegel’s ideas and works. Fortunately, our modern technologies are making it easier to implement Riegel’s ideas, and that has been progressing in the form of mutual credit clearing circles like LETS, and in commercial “barter” exchanges.

The main obstacle to progress is people’s preconceived notions about money. The ideas of non-governmental money and the need to separate money and state run counter to their general conditioning, but the increasing amounts of media attention given to the recent proliferation of community currencies and exchange systems has helped in changing that.

The most difficult task will be the creation of an independent, non-political unit of account. This is the one area where Riegel falls short. He failed to explain how his abstract unit of value might achieve a meaning independent of the dollar unit. If the dollar is the “language” of value we have grown up with, we can learn a new language only in relation to it (translation), or by immersing ourselves in a culture where dollar is NOT “spoken.”

It is by our everyday purchases of goods and services that the dollar as a value unit acquires meaning. If the valun is to have a life that is independent of the dollar, it must be defined in terms of some of those goods and services, at least initially. Which goods and services to use?, traded in which markets?, are the questions that constitute the measurement challenge.

The valun can be launched at par with the dollar or other political unit, but how can people differentiate one from the other unless there is a physical reference? What will cause the valun to diverge from the dollar as the dollar is debased? Without that physical definition, the valun will simply follow the dollar as a unit of measure. If vendors will accept either dollars or valuns in payment, how will they know how many dollars to ask for if the valun price is held constant?

You may answer, “By looking at a price index.” Well, any index will be defined in terms of specified goods and services. So that amounts to a de facto definition. Let’s choose our own definition instead of relying on a manipulated government index like the CPI. – t.h.g.

Edwin Clarence Riegel (1879-1953), better known as E.C. Riegel, was an independent scholar who dedicated himself in the 1930s to understanding exchange, thinking that a simple and dependable means of exchange would do more to enhance the dignity and well being of the common man than any political reform. Before that, he had been active in the consumer movement in the 1920s and 30s, launching, as president of the Consumer Guild of America, virtually a one-man war to make America safe for the consumer, publishing four books in the first two years (The Yellow Book (1927); Barnum & Bunk: An Exposure of R.H. Macy & Company (1928); The Three Laws of Vending; and Main Street Follies (1928). Later, he concentrated on understanding the nature and functioning of money, publishing The Meaning of Money (1936), Private Enterprise Money (1944) and, posthumously, The New Approach to Freedom (1976) and Flight from Inflation: The Monetary Alternative (1978).

Riegel conceived of money as simply number accountancy among private traders. As he came to see it, an exchange medium is still direct barter to the degree that it has any intrinsic value. Fully evolved money enables traders to escape altogether the limitations of direct barter and achieve “split barter,” enabling the purchaser in a transaction to make payment at such time and to such parties as he might choose.

Riegel’s ideas do not coincide with those of any established monetary school. Traditional views of money lie along a spectrum from those of the “hard money” theorists who favor least possible government intervention in the free-market process, to those of the “fiat money” theorists who are quite comfortable with statism, viewing money as a creation of government and requiring no intrinsic value or anything more than government management of money issue. Ironically, Riegel came down on the side of a rigorously free-market fiat system; for a mature exchange system as he conceived it would depend on no intrinsic value at all, nor would it require or tolerate any degree of government participation. In that sense, the fully evolved exchange system would be a natural system operating entirely as a spontaneous, free-market process with no political mandate imposed.

Since virtually everyone assumes that money must have, if not intrinsic value, at least some degree of government involvement, Riegel’s idea of true, i.e. fully evolved, money requiring neither has been slow for find acceptance. It might be easier to understand his concept as a moneyless exchange system—although his idea of the evolution of exchange from primitive, direct barter to true money as mere number accountancy among traders in the market place has an elegance about it.

Riegel’s idea of a fully developed exchange system can be understood in terms of “trading circles.” A is a furniture maker, and B has a lumber company. A buys lumber from B to make furniture, paying him with valuns (Riegel’s contraction of “value units”). B then spends the valuns as he likes to purchase what he needs, as do those farther down the line, while A proceeds to make furniture. When A completes the furniture, he offers it for sale competitively on the market, accepting valuns.

Who issues valuns? If A’s balance with the system accountant is zero or negative, then the valuns he pays to B are new issue; if not, then they are simply valuns circulating in the trading circle. None but the system accountant knows which they are. If they are new issue, then when A sells his furniture and accepts valuns in payment, he redeems his issue, and his account with the system accountant comes out of the red and into the black. Valuns may be thought of as mutual credit tokens. To qualify as a member of a trading circle, one agrees to put product or services competitively into the market and to accept valuns in payment. There can be no question about a person’s willingness to redeem his issue because, after all, that is what he is in business for.

There might be numerous trading circles, each with its own accountant but its valuns indistinguishable from those of other trading circles. The accountant in each case assigns each member of his circle a credit limit based on experience with that member’s type of business, charging a small fee to cover bookkeeping and insurance against default. Thus might accounting firms form competitive trading circles, charging less or more for their insurance depending how lenient or strict the credit limits they allow. The circles would cooperate under a board of governors primarily conducting research into optimal credit limits for different lines of enterprise and periodically performing credit clearances among the various trading circles.

Riegel proposed launching a valun system with the valun at par with some existing political unit such as the dollar, much as the United States dollar historically was introduced at par with the Spanish dollar. As people internalize the value of a given political unit at any given time, so would they internalize that of the valun. Over time, as infusions of new units diluted its value, the political unit would diverge from par with the valun, the latter remaining constant or showing relatively little change.

Since Riegel proposed valun trading circles long before the Internet, he described a valun system operating with paper checks. The Internet would vastly simplify its implementation.

Some advantages of trading with valuns:

(1) It would facilitate micro and start-up enterprises that under the existing political system cannot qualify for bank loans, since it would enable them to monetize their future productivity which, after all, is the backing of every valun.

(2) It entails no use of interest because with the exception, perhaps, of a small personal loan now and then, there would be no occasion for borrowing. The business person would simply issue new valuns as needed, according to his credit limit. This is an attractive feature for Islamists, since it accords with their religious stricture against interest.

(3) It does not require or tolerate participation by governments. Because these are not traders offering goods and services competitively in the market, they could not qualify as participants in a trading circle. Consequently, they could not issue units that would dilute the valun. The resulting constancy of the valun, relative to all political monetary units, would be a boon for business accounting and planning. Riegel observed that long-term business planning today, dependent on political units that are continually changing in value, is like a builder trying to build a house using a yard stick that varied in length from day to day.

(4) Because of their relative constancy, valuns could be expected to become the preferred unit of account over dollars or other political units. To the degree this happened, it would eliminate deficit public spending, effectively restraining governments to what could be collected in direct taxes and hence severely curtailing global military adventuring.

Riegel was the first to explicitly call for separation of money and state. Rather than advocating any political reform, he forecast the continued, natural evolution of exchange towards true, apolitical money and looked for ways to assist in that evolution.

He also was the first to predict a global inflation. Foreseeing all political monetary units inflating and “sliding into the sea,” he urged study and implementation of the valun plan. Past inflations had been local or regional; there remained always some unit, such as the British pound in the 19th century and the dollar in the 20th, to which businessmen could escape to carry on their accounting. Today there is no such unit. Should accountancy fail worldwide for want of a sufficiently stable unit of account, the global economy could fail. Hence the urgency, as he saw it, to set up a unit to which business might flee before that occurred (that is the significance of the book title, Flight from Inflation).

For a thoughtful discussion of Riegel’s ideas, see David Boyle, The Money Changers (London: Earthscan Publications 2003). Riegel’s ideas are available on the web at www.ReinventingMoney.com. Apart from many brief essays, his main works are:

1978 Flight from Inflation: The Monetary Alternative.
Los Angeles: The Heather foundation

1974 The New Approach to Freedom.
San Pedro, CA: The Heather Foundation

1944 Private Enterprise Money.
New York: Harbinger House

1936 Irving Fisher’s World Authorities on the Meaning of Money.
New York: Consumer’s Guild of America

Ron Paul IS a national treasure. He is virtually the only member of Congress who has consistently and forcefully argued that the central banking system (the FED) needs to be eliminated. At the very least, the Fed must be accountable to the people. It is a private company that operates in secret.

Central banking from its very beginning (notably the founding of Bank of England) was designed to enrich the bankers and enable the political powers to circumvent popular control. The bankers are enriched by their monopoly control of our credit on which they require us to pay them interest when we “borrow” it back from them. The politicians get to spend virtually as much as they want to enrich themselves and their minions, to oppress the people, and to fight wars and undermine popular government and community self-determination.

The Fed enables all of this then tries to manage the effects of these crimes, giving us both depressions and inflation of the currency. That amounts simply to deciding who will be made to pay the price. On the one hand, small businesses are made to fail and workers become unemployed when banks restrict credit to the private productive sector, while at the same time lavishing credit on the government, bailing out financial behemoths, and financing mega-corporation that are deemed “too big to let fail.” On the other hand, the Fed will monetize government debt as needed to enable profligate government spending to continue. That monetary inflation naturally causes prices to increase, diminishing the purchasing power of everyone who lives on fixed incomes or has dollar denominated savings. In the extreme (hyper-inflation), the middle-class gets wiped out financially.

The one thing that NO ONE wants to talk about is LEGAL TENDER. It is legal tender laws that compel acceptance of debased political currencies. Without legal tender, those inferior currencies would quickly be displaced in the market by private and community exchange media that are properly issued on the basis of real value. This is happening anyway, as parallel exchange systems are being developed and used, but legal tender and general ignorance about money, banking, and credit put them at a disadvantage.

While the “Austrian School” of economics has managed to gain some attention, it’s too bad the “German School” has remained obscure. Names like Rittershausen, Beckerath, Zander, Meulen, and Milhaud, should become household words, along with E. C. Riegel. Their writings on free money and banking (i.e., free of monopoly control) are available at http://reinventingmoney.com.

These issues are largely covered in my various presentations that can be seen as movies or slide shows on my blog, http://beyondmoney.net.

– t.h.g.