E. C. Riegel’s Money Quiz and the True Money System

How many people in the world really understand money—its essence, its purpose, its proper management, its potential either to free us or enslave us? Sadly the number is close to nil as Riegel discovered decades ago, an opinion that was shared by renowned monetary economist Irving Fisher of Yale University. According to Riegel, Prof. Fisher, in a public speech “indicated that most persons who undertook to discuss money did not understand the subject and that those ‘who understood the real meaning of money’ were very few.” That was sometime in the mid-1930s, but it seems that the same situation still prevails today.

A little later, Riegel wrote a letter asking Fisher to specify whom those few might be, to which Fisher responded with a list of ten names, along with the caveat that the list was by no means exhaustive, and that there were probably several other of which he (Fisher) was unaware.

Next, Riegel, under the banner of the Consumer Guild of America, prepared a questionnaire which he sent out to the ten “experts” that Fisher had named. Riegel then published, in 1935, the results of his survey in a book titled, The Meaning of Money. I’m not aware of the existence of any digital file of that book, but there are a few bound volumes and photocopies still available.

My intention here is not to review or summarize that book, but simply to provide some background showing Riegel’s diligent research of the subject and to set the stage for presenting some of his eventual conclusions.

Riegel died in 1953, but part of the vast legacy he left behind is a one page document that bears the heading, Are These Propositions Correct? This document bears no date, but was probably written late in his life, and seems to be a concise summary of what he discovered and came to believe as result of his many decades of research and cogitation in the areas of money and the exchange process. I have transcribed that document, and present it below for your consideration.

Are These Propositions Correct?

  1. Money is a means of facilitating trade by splitting transactions in halves, giving the buyer value and the seller a claim for equivalent value upon any one or more traders in the community of traders.
  2. The issuance of money arises out of a purchase and sale transaction requiring tender and acceptance. Therefore, it is a bi-lateral function that can be exerted only by a buyer and a seller and there can be no money issue on behalf of another. Therefore governments cannot issue money on behalf of their constituency.
  3. Implicit in the act of issue is the agreement of the issuer (in common with all others in the trading community) to accept the issue in exchange for value when tendered. Therefore, only one who is prepared to accept money in exchange for value, when tendered, is qualified to be a money issuer and all persons so qualified to accept are ipso facto qualified to issue. Thus the power to issue is inherent in all traders.
  4. Money circulation is a cycle wherein the money passes from issuer to acceptor and from acceptor to acceptor until finally accepted by the issuer and thus retired. The money system is therefore a bookkeeping system whereunder money springs from a debit and is retired by an offsetting credit. The instrument evidencing the bookkeeping process need have no intrinsic value.
  5. Money is actually backed by the value surrendered by the seller and potentially backed by the value in possession of the next seller. Therefore, all “reserves” such as precious metals or other values are purely gratuitous and irrelevant.


If the above propositions are correct, we must conclude that a true money system, not only may, but must be established as an integral part of the private enterprise system and the issuing power must be denied to all except private enterprisers, the exclusion to include all governments and non-profit institutions. The true money system must be based upon voluntary cooperation of the participants. Therefore no legislative or political action is required. Therefore, without political sponsorship or boundaries, the true money system is potentially universal and uniting all traders with one monetary language.

Sometimes Riegel’s statements require clarification and elaboration, which I have done in some of my own writings, and there are a (very) few points on which I disagree. But Riegel has given us here a clear view into the simple essence of money and the true nature of the exchange process, providing the material we need for building a solid foundation upon which economic democracy can be erected. –t.h.g.

4 responses to “E. C. Riegel’s Money Quiz and the True Money System

  1. Pingback: Newsletter July 2012 « Beyond Money

  2. “All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation”.
    John Adams

    Riegel in his day said that this was still the case and even 50+ years after that it still is to this day true. This is why we’re here, so we ask now who will listen to Riegel and Tom Greco?
    Mike Aldana


  3. Interesting to see him using the term bi-lateral. I believe the term “multi-lateral currency” or “multi-lateral credit issuance” is the most desirable term for what we are talking about, superior to the term “mutual credit” which I personally find to be too vague; our terminology I believe helps determine the extent to which our ideas will become known and, as mentioned, *very few* truly do understand money. The term I propose can also be contrasted to the terms “uni-lateral currency” and “uni-lateral credit issuance” which in fact are what bankers practice. Who gave them exclusive right to issue currency? The use of the terms I propose helps stimulate people to reflect upon currency issuance which, as I see it, is the fundamental blind spot in why people do not understand money.


    “You need no political laws to liberate your power for prosperity and peace; you are the master of your fate by natural law, if you but discover that law.” It is true Riegel found and presented the law of Money. So a “true money system” is forthcoming founded on his discoveries.
    This “true money system” which Riegel envisioned also will of necessity adhere to the “natural laws of money” as he defined them elsewhere as he discovered them and they are declared in his writings.
    Chapter 2 of Flight From Inflation Riegel says.

    “It tests the imagination to visualize the blessings that await mankind once the balance wheel is no longer disturbed by the eccentric of primitive monetary concepts.
    In 1934, after years of fruitless search for a money master, my own hopes were rekindled by a press statement from Professor Irving Fisher, the renowned monetary economist and teacher, that there were ”only a few persons in the world who understand the meaning of money.” I asked Professor Fisher to name them, and he submitted the names of thirteen Americans and five Europeans. Of these world authorities I succeeded in getting six Americans and two Europeans to enter a symposium to be presented to the United States Congress, which at that time was debating monetary theories.”*
    *E.C. Riegel, Irving Fisher’s World Authorities on the Meaning of Money. New York: Empire Books, 1935.

    He later wrote.
    “Let us now formulate a definition of money that we can refer to as we consider the workings of monetary systems. 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. Error has labyrinths; truth is an obelisk.
    a. Money is a Receipt for Value
    b. Expressed in Terms of a Value Unit, and is
    c. A Transferable Claim
    d. For an Equivalent Value
    e. To be Determined by Competitive Exchange
    f. In Which the Issuer is an Active Vendor
    g. Whose Issue Conforms to the Customs of a Convention of Participants in the Monetary System.

    a. Money is a Receipt for Value
    A receipt for value implies an exchange. Hence, money springs out of exchange and not vice-versa. It cannot be created by political statute nor by any action that is independent of trade.

    b) Expressed in Terms of a Value Unit
    The value unit may be the equivalent of any measure of any commodity at the time the unit is adopted. Thereafter the value unit must be divorced from identity with the commodity selected since, under the law of supply and demand, the value content of all commodities is constantly changing. The selection of amount, commodity and time serve merely to provide a reference point for the value unit, i.e., an initial value. Thus a new monetary unit might be established by making it par with an existing unit, but its parity at launching would not imply continued parity, inasmuch as the values of the two units would thereafter depend upon the monetary policies of their respective administrations.

    c) A Transferable Claim
    Transferability is of the essence. Hence, there can be no promise, in the ordinary sense of the word, involved in money, for if the fidelity of a monetary instrument depended upon the credibility of a given promisor, its transferability might be severely limited. Monetary credit must be a social credit, backed by all participants in the exchange system but identified with none.

    d) For an Equivalent Value
    This implies stability of the unit, which is necessary for a viable monetary system.

    e) To be Determined by Competitive Exchange
    There is no way to assure the holder of money that he will receive a value at the time he buys equivalent to the value he gave at the time he sold, other than by free competition. Only under free competition can the requirements of trade equitably regulate the value of money.

    f) In Which the Issuer is an Active Vendor
    Only as an active bidder for money under competitive exchange can the issuer of money justify his issue power. He who would create money to buy goods or services must be prepared to produce goods or services with which to buy money. Since personal enterprisers are dependent upon reciprocal buying and selling, it may be seen that they are compelled, by self-interest, to be redeemers of money as well as issuers. It should readily be seen that governments are not under such necessity, since they have the taxing power. Such services as they render are not subjected to the choice and evaluation inherent in free trade. Hence governments are not qualified to issue money.

    g) Whose Issue Conforms to the Customs of a Convention of the Participants in the Monetary System.
    The rules and regulations prescribed in the convention of the participants must be honored, to assure fidelity of issue. This implies a formally structured monetary system and authority that establishes the monetary unit, prescribes the issuing process, its limits, the implements to be used, and such other mutually acceptable rules as will give dependability to the unit and to the system.


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