The Legacy of E. C. Riegel

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 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

8 responses to “The Legacy of E. C. Riegel

  1. Hey, cool website. I actually came across this on Ask Jeeves, and I am happy I did. I will definately be revisiting here more often. Wish I could add to the conversation and bring a bit more to the table, but am just taking in as much info as I can at the moment.

    Thank You

    Italian Restaurant Dublin


  2. Does anyone have any experience with The Community Exchange System? I believe it is set up along the lines of EC Reigel’s valun system.

    New members are allowed to buy stuff up to a pre-set debit limit. To continue buying, members must sell stuff or do services to earn credits.

    The interface is pretty slick and easy to use. I haven’t made much effort to find people willing to trade for ‘doorknobs’ , the money unit.

    Visit if you like at CES. My local exchange is ‘Leelex’.


  3. Mike (and Tom G.),

    Please see: “The Institutional Character of Electronic Money Schemes:
    Redeemability and the Unit of Account” by Stefan W Schmitz in which I am cited. I think you will find much to agree with.

    Click to access 0211009.pdf


    p.s. I hope you are doing well Tom; I remember your trip to my home in Half Moon Bay, CA.


  4. Re: To The ” Fix It Before It’s Broke” (automatically generated) post. They should also know that

    E.C. Riegel said over 50 years ago “Only by turning our backs on the muddle of past monetary economics can we fully understand the subject of money. We must reject such irrelevancies as metallic and other standards, managed currency, bullion and specie redemption, quantity theories, legal tender, and other issues, which have consumed endless hours of debate. Let us simply apply our common sense to the rationalization of the subject of money”.


  5. Jon
    Thanks for stepping up and offering your assistance to furthering the vision E.C. Riegel gave birth to. You are also welcome if you wish to link or refer to the site we have set up featuring some of his writings. We have some of his books in hard copy for those who wish to read him off-line. This reading effort will help others and those of the Austrian school who may also wish to be further enlightened on this huge problem. It will be promising to share common truths of our discoveries and convictions based on the “Law of Money”. Mike


  6. Mike,

    In response to your September 7th comment, I am an Austrian economist and I have studied Riegel extensively (it’s rare for an Austrian to be a fan of Riegel, but I see the distinction he makes with standard of value freedom). The free market money forces at play in a Riegel system are playing out today in the digital currency world. See Mark Herpel’s

    My new post (timing is coincidental) on Riegel is here:

    Since I am focused on real-world adoption, I guess you could say that, in essence, I am publishing my blog to advance Riegel’s primary thesis of separation of money and State. Your comments are welcome.



  7. As long as a government isn’t expressly forbidden, by its structure, from participating in such a system, what’s to stop people from accepting the government’s ability to extort money from its citizens as backing for its issuance of valuns in a trading circle?


  8. For those of you who have not really read/studied E.C. Riegel. Mr. Greco has given him and continues to give him much credible recognition as one of the worlds greatist monetary thinkers.
    Who wants to assist in addopting the standards and principals of the natural “laws of Money” Riegel identified and dedicated his life to bring to our generation? The global inflation he predicted is about upon us. Are we the only free thinkers out there who are up to the challenge of applying the truths he taught and that were required for our productive future? Please.. E-mail me if you think you are up to the task Riegel put fourth as it relates to the future of money.

    Mike Aldana


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