A money system is a vast accounting mechanism. The
private accounts that are kept on the millions of ledgers of
private tradesmen are all auxiliary to this master ledger
which determines the meaning of the terminology in which
these individual accounts are kept. Disturb or distort the
master ledger and you affect likewise all the millions of
subsidiary ledgers in the economy. Society must have a
stable money system to preserve its own stability.
When businessmen resolve to set up a money system,
they agree to hold in trust for each other goods and services
that are pledged against the drafts which they have issued
in the form of money. These values - that are held in
trust by all for any who may present a money draft therefor - constitute a vast pool, not housed at one place, but
scattered throughout the trading sphere. This vast pool of
goods and services is the basis or backing for the outstanding money supply. "Reserves" and metal hoards are but
window dressing. Only that which is purchaseable is back
of money.
While all the traders in the Exchange hold values in trust,
none knows who actually may present an ownership claim
therefor by the tender of money, and whether there is
warrant for such tender. Therefore there must be a central
bookkeeper, with an all-seeing eye, that keeps account of
who holds values and who holds claims thereto. Some
means of conveying this information to and from the
central bookkeeper must be available.
For the purpose of fixing in our minds the fact that
money exchange is accountancy and that no value attaches
to the money instruments, let us assume that the central
bookkeeper operates by telephone, without money instruments. A telephones the central office and states that B
has ordered some merchandise at a given money price and
asks whether B's account will permit the charge. On being
assured that it will, the goods are shipped and the central
bookkeeper debits B's account and credits A's. Thus a perfect money transaction has been consummated because
values were stated in terms of a money unit and value has
moved only one way, and from which there has arisen a
debit and a credit warranted by the rules of the money
system. Yet no instruments have been issued, and thus
there is nothing material upon which the mind can fix a
value or attach a superstitious power. This demonstrates
that money is first of all a concept in accountancy and that
it may be expressed verbally. We may go further and
assume that, in confirmation of the above transaction between A and B, B sent to the central bookkeeper a duplicate
of A's order. Still we think of the transaction as a simple
bookkeeping transaction and there is no superstition attaching to the duplicate order.
Let us hold to this bookkeeping concept and assume that,
with the order for the goods, B sent via A an order known
as a check directing the central bookkeeper, to debit his
account and credit A's account, and that A sent this to the
central bookkeeper instead of a duplicate order. In spite
of the fact that the check is known as a money instrument,
it is still nothing but a bookkeeping memorandum - and
is not in the least mystifying.
Now we will assume that B calls up the bookkeeper and
says that it is inconvenient to write checks for petty transactions; and asks if the bookkeeper hasn't some plan for
obviating check writing. The bookkeeper says, "yes; I
have some bills, in different denominations and coins, that
require no signature and are good in anybody's hands" B
asks how he can get them. The bookkeeper says: "send me
your check for the amount you want and I'll give them
to you. I will debit your account for your check in the
regular way." Now, because nicely engraved pieces of
paper and pretty coins meet the eye, we are in the zone
where the greatest superstition arises. To most persons
these instruments are money, and nothing else is money.
Yet these are but bookkeeping instruments like the check
and the duplicate order. In essence, they are the same,
but the check is better suited to the purpose visualized than
is the duplicate order, and the currency is better suited
than is the check for certain purposes. Neither the check
nor the currency accomplished anything more than did the
telephone call; all were instrumentalities of bookkeeping
and each effected a money transaction.
How does the currency spring into existence? As we
have seen, someone had to order and authorize it. The
bookkeeping method is to set up a special currency authority who has caused to be fabricated the pieces of paper and
coins. When a check is written for it, the amount of the
check is debited to the account of the check writer who
receives the currency and the same amount is credited to
the currency authority. Thus the currency is just as much
a creation of the check writer as is the check which requisitioned it. It becomes the equivalent of a certified check
payable to bearer. No mystery, no magic, nothing awesome. When the currency returns to the bookkeeper, it is
credited to whoever returns it and charged back to the
currency authority where it is held subject to some other
requisition for it. Note that the currency sprang out of a
book account, just like the check and that both, therefore,
have the same basis.
The currency under the valun system will of course be
manufactured at some central plant where adequate safeguards will be set up against theft; and the counterfeiting
problem will exist as it does with any money system. It
will be the duty of the Central Board of Valun Exchanges
to provide the currency in bills and coins on demand of
the various Exchanges, so as to provide uniformity and
central control.
The promise to pay and promise to redeem or exchange
- forms that are used on existing money instruments - will
not be used. There is nothing to pay and nothing to
redeem in true money. Its purpose is to requisition goods
and services, and not to requisition some other form of
money. The check form need but say, "Credit the account
of .................... and debit the account of the
undersigned." The currency bills need but carry the word
VALUN and the denomination. Coins need carry only
the word VALUN with the fraction they represent such as
1/100, 1/20, 1/10, 1/4, 1/2. The name of the
1/100 would be cend, (Esperanto) the five cend piece
might be called the quin, the ten cend piece, the tenth. The
material from which the coins would be stamped should
be the most inexpensive that would serve the purposes of
wear and weight. Some concession might be made to the
vending machine industry.
To enable the valun system to render the check clearing
service rendered by banks - without their luxurious quarters and extensive units and branches - it is proposed that
only one Exchange be set up for each state; in any satisfactory quarters, even if it be in an industrial section. This
plan precludes the necessity for members to visit the Exchange, and relies entirely upon the mails for conveying
deposits and returning vouchers. Such a plan must provide
the means for drawing and depositing currency; and to
serve this need it is proposed to have Valun Currency
Counters in business neighborhoods.
NEIGHBORHOOD CURRENCY COUNTERS
A Valun Currency Counter would be authorized by a
franchise issued by the Valun Exchange to an applicant
member located in a business neighborhood where there
might be sufficient demand to justify. The primary function of the V.C.C. would be to accept deposits of currency
or checks for currency on demand. Members requiring
currency would issue checks payable to the Counter dealer
- who would surrender the currency just as is now done
by banks. If a member wished to dispose of currency, the
Counter dealer would issue his check for it. If the member wished to store cash with the Counter dealer overnight
or the weekend, he could do so and be guaranteed against
loss. The Counter dealer would of course have to provide
himself with a safe and adequate burglary protection. The
currency would be available to the Counter dealer from the
Exchange by some safe conveyance; but it is believed that
there would be but little occasion for currency to return to
the Exchange - because a dealer finding himself long would
probably also find some other dealer, in the same city or
neighborhood, who was short - and who would buy the
surplus with his check.
The secondary function of the V. C. C. dealers would
be to buy valuns for dollars, or dollars for valuns, at the
current rate of exchange. Since all valun members would
(at the outset) be obliged to do business on both a dollar
basis and a valun basis, and since some non-members would
sometimes come into possession of valuns, the need for such
"foreign exchange" service is obvious. The existence of
such a money market would serve the additional purpose
of establishing an official differential between the dollar and
the valun, for the purpose of pricing goods and services
in both units.
The Counter dealers would be organized in the Valun
Currency Counters Association and would report their
valun-dollar dealings daily to their central office where the
exchange rates would be determined after business hours
every day, and wired to the members of the Association
every morning. These rates would of course be determined
by the law of supply and demand. If valuns be in greater
demand than dollars, the dollar price of valuns would rise.
If there be greater demand for dollars, the dollar price of
valuns would decline. It is expected that there would be a
continuous trend favorable to the valun (i.e., the dollar
price of valuns would show a trend rise) but there may be
reactions, and the daily variation would probably be irregular.
The V.C.C. Association, as it announced the daily exchange rate, would supply a guide to merchants for the
double pricing of their wares in valuns and dollars. Thus
if the valun rate were announced as $6.65, it would mean
that any merchandise bought by the merchant on a valun
basis and given the usual mark-up, would be multiplied 6.65
times to get the dollar price. If an item be bought on a
dollar basis and given the usual markup, a deduction of
85% would be made to arrive at the valun price. This
percentage would be announced publicly every day so
that buyers, as well as sellers, would know the differential.
There would be no agreement among dealers to follow
these price differentials; and this would not affect the scale
of prices of different dealers. However, if a dealer did not
follow the differential in his valun and dollar pricing, the
tendency would be for buyers to purchase, at the Currency
Counters, valuns or dollars whichever gave them an advantage with the merchant who had failed to follow the
official differential in his pricing. This in turn would
work to the disadvantage of the merchant when he came
to convert his dollars or valuns, one into the other. The
influence of the Valun Currency Counters would therefore
be to make the differential between dollar and valun uniform in all shops, however much their price scales might
vary. At the outset, the practice would be to quote prices
exclusively in dollars, with the discount for valuns. As
valun trading gained the ascendency the practice would
probably be adopted of quoting exclusively in valuns, with
the premium rate in dollars.
The Valun Currency Counters would be privately owned
and conducted under the terms of the franchise issued by
the Valun Exchange. All services rendered by them would
be subject to an appropriate fee which would be stipulated
by the Exchange or regulated by competition. Whatever
the cost to the members might be, it would be less than the
cost of maintaining branch Exchanges after the manner
of the present banking system with its many units and
branches luxuriously equipped.
The checks that pass through the Exchange would be
its continuous stream of income by reason of a charge on
each check cleared, and this per check charge should be
minimized by economies wherever possible. There is in the
valun system no need to do the pretentious thing - to
inspire public awe and blind confidence. There is no occasion for window dressing or display of any kind. The
system is to be a matter of fact institution - serving the
simple needs of exchange, reflecting the democratic control
of its members, and serving them essentially as community
bookkeeper.
