Design Requirements for a
Personal Enterprise Monetary System

FOR THE REALIZATION of its ideal, any design for a nonpolitical, universal monetary system must depend upon demonstrated merit in winning participants to it from the political monetary systems and, by the test of competition, prove itself worthy of universal acceptance by personal enterprisers. Such a system can involve no monopoly powers. If it does not respond to the needs and preferences of all people, it will face competition by one or more other systems.

The unit of such a system might be called the "valun" (value unit), and the system the "valun system." When a valun system develops, it will be operated through departments of existing banks or other corporations or by individuals or groups of individuals, capitalized or not. There will be latitude for private initiative and freedom of participation by all classes in the operating service as well as in the utilization of the facilities of such a system.

Participation will be entirely voluntary. No legislation will be enacted or repealed. It may start in a local area, but subsequently, having no political character and thereby being anational, it will be able to extend anywhere and become universal, progressively displacing all political monetary units. While there might very well be competing systems in the beginning, sooner or later one of them likely will become universal, as trade naturally tends to unify and adopt a single monetary language.

Governments, national, state and local, will participate in the use of valuns as acceptors and transmitters, but not as issuers. The practice of legal counterfeiting of the exchange media, now indulged by all national governments in the political monetary system, will be impossible in a valun system.

Although money, insofar as it is genuine, has always sprung from personal enterprise, the first valun system will be the first monetary system to assert the control of money as the exclusive prerogative of its true issuers, repudiating the idea of the state as a contributory factor and rejecting its intervention therein. That is why the valun concept is the first concept of money that can be rationalized.

The lack of monetary rationale and the universal confusion on the subject existing throughout society from the grass roots to the academies and parliaments is due to the acceptance of a basic error, namely, that money is a creation of the state and must have a legal tender status and political regulation. If one accepts this false premise, only confusion can result, as has resulted in the entire literature and jurisprudence of money. If we reject this postulate, we free our mental processes and can easily master the subject.

It should not take much thought, once the proposition is posed, to realize that money is a device of traders, that it flows out of purchase and sale transactions, and that anyone who is not a trader cannot qualify as a money issuer. How can a government possibly be an exception to this rule?

Some will answer that governments render services and thus contribute something to the market. But is government service rendered to the market? Is it purchaseable? True, governments render a mélange of service and disservice, but there is no way of pricing the good and rejecting the bad. The only way to separate service and disservice and to evaluate the former is by the test of pricing in the free, competitive market—by voluntary purchase. Citizens are not sold government service; they are coerced into paying taxes, which is merely confiscation. Money is for the voluntary exchange of goods and services. It has no coercive element and no deceptive devices, and therefore has no place for tribute takers, taxers and counterfeiters. A racketeer could not justify his counterfeit money issues on the pretext that he extorted it all for the "service" or "protection" he rendered.

Until some way can be found for government service to be offered on an over-the-counter basis, the citizen must bear taxes table d'hôte and resist them as best he can. But he cannot resist or even comprehend his taxes if government is admitted to credit in monetary exchange and thus allowed to issue mock money into the money stream, thereby making every merchant a surreptitious tax collector and bearing in the eyes of the deluded citizenry the onus for higher prices through inflation.

Tax collection must operate outside and not within the money credit system. Government must be obliged to get its taxes the hard way—above board, where the citizen can be conscious of them and can offer the appropriate resistance. We cannot govern government and stabilize exchange until we end the political money counterfeiting power. Counterfeit money, if the counterfeiter is active enough, can destroy the whole social, economic and political order. Thus we come to the first cardinal principle of a sound and honest monetary system:

Governments, and all others that do not buy and sell goods or services in competitive trade, must be excluded from undertaking the money issuing power.

Stepping back now from the urgency of the political inflation crisis to examine the lesser, though more frequent, private bank credit crises known as business cycles, we inquire, how come? We find that these crises arise by reason of a double meaning given the word dollar. By the bank "loan" process the borrower creates checkbook dollars that the banker agrees to convert into currency dollars on demand, while he, the banker, is under legal restrictions in the amount of' currency dollars he can make available. With the rise in the number of check-book dollars, the amount of possible claims for currency compared to the amount actually available becomes more disparate, and with the precipitation of the crisis, the potential claims turn into actual demands, with resulting defaults of banks and borrowers in the downward trend of the cycle into depression.

We need not here go into the question of what precipitates the crisis. It is sufficient to realize that they could not be precipitated if the word dollar in the borrower transaction had not a different meaning from the word dollar as used in the bankers' liabilities to their depositors. In serving the needs of the commercial community, the banker is obliged to promise more of something than he can possibly deliver. Like the cheating goldsmith banker who issued more promises of gold than he could fulfill, the modern banker promises what he does not have, not because he chooses to, but because he is obliged to do so to fulfill his function under the political monetary system.

The political monetary system is thus fraught with a speculative factor that would not exist in a true monetary system. By its elimination, the business cycle could be eliminated. Thus we come to cardinal principle number two of a valun system:

There must be no distinction as to volume or interchangeability between check valuns and currency valuns. The check issuing power and the currency issuing power must be coextensive.

These two are the only indispensable and unalterable principles in a genuine monetary system. All else is a matter of preference to be worked out in the crucible of practice.

Any who accept these two cardinal principles are, regardless of their opinion on other matters of policy, qualified to participate in the task of projecting the valun system, for the system contemplates the solution of all collateral questions by the infallible process of competition among banks, which will be free to follow any preferred policy outside the two cardinal principles above stated.

Flexibility of policy could be provided by the simple device of requiring each bank to adjust, to its own performance, its reserves against defaults. Such reserve, as well as overhead expenses, would, of course, impose a cost upon its account holders, and thus the most successful policy would reap its competitive advantage by reason of lower operating expenses.

For instance, take the two questions of policy that are the subjects of the greatest amount of controversy—the standard and the credit base.

The "standard " advocates argue that a monetary unit, to have substance and win acceptance, must specify a measure of a specific commodity deliverable on demand. The opposed group, of which the writer is one, holds that this is entirely gratuitous. It holds that the merit of money is that it is exchangeable for any commodity in whatever sum the market, by competition, ordains, and that price fixing (which is essential to the standard idea) is anathema to free exchange.

On the question of the credit base, the traditional school holds that realized wealth is the proper base. Emphasis is thus put on past performance, and hence this view is backward-looking, aristocratic and conservative. The opposed school, to which the writer adheres, bases credit on prospects. It believes that the purpose of money is the generation of new wealth from human energy and that realized wealth is no generator of money. This view is forward-looking, liberal, democratic and dynamic.

Here, then, we have opposed views on two vital questions that can be debated in theory 'til Kingdom come without a solution. If we allow such issues to occupy our minds at this time, we merely frustrate ourselves, whereas, if we leave them to practical test, they will be resolved by the all-solving process of competition.

We should remember that the valun concept supplies, for the first time in world history, the opportunity to develop a monetary science by purely voluntary processes. No legislation and hence no coercion is involved. The widest latitude is given to initiative, in that any person or group may open a valun bank and conduct it on whatever policy seems most scientific or most popular and have the opportunity of proving it by competition.

Likewise, once the valun system is operating, it must itself win the competitive test with the existing political polyglot monetary system. If its cardinal principles be right, it or one like it must ultimately unify all business in the world on a personal enterprise monetary unit.

Let us, who favor personal enterprise money, concentrate our whole thought upon the cardinal principles of the valun system, making sure that they are sound, and leave all else to empirical processes.