Tag Archives: E. C. Riegel

Sovereign or Slave? How perversion of the money power has decided the issue—until now!

As I indicated in my previous post, No democracy when government has the money power, E. C. Riegel, more than 75 years ago, explained, better than anyone else I’ve encountered, the nature of money, its fundamental function, and the history and consequences of its politicization, and outlined a way of transcending the perverse and dysfunctional system that we have lived under for far too long. His work is perhaps best summarized in his book, Private Enterprise Money, from which I quoted. I continue here with further quotes that elucidate the key points of sovereignty, money and government.

Riegel’s solution involved the organization of credit clearing circles that he called “Valun Exchanges” that would be joined together in networks for exchanging goods and services. He argues, as I do, that it is the individual person that is sovereign, not any king, emperor or government, and that the power to issue money, therefore, also resides in the individual. When we realize that money is really only short-term credit, it becomes clear that it is in our power as individuals to give it or withhold it as we go about our daily business of exchanging the value (goods and services) we produce and consume.

In Chapter 9 of his book, Riegel proposes that the Valun Exchanges be organized on a “state-wise” basis. He observes that:  “The sovereign power of the citizen rises to the state government; and from there it is delegated upward to the federal government, and downward to subdivisions. We are, first of all, citizens of our respective states; and this implies citizenship also in local and national governments.” p. 139

He then recounts the history of the union of the American colonies after their separation from British rule and argues that: “The advantage in abolishing this multiplicity of monies [of the various colonies] was obvious, but the implications involved in surrendering the money issuing power to the federal government was not comprehended. The gain to all in uniformity of money unit was visualized; the loss in sovereignty thereby suffered, was not.”  p. 140

From this point onward, I will let Riegel’s words speak for themselves. All page number refer to the printed edition.

“We now realize that the money power of the private citizen is in fact his sovereignty; and that in yielding it he yields his sovereignty. Thus the transferring of the money power from the states to the federal government was the transferring of the citizens’ sovereignty to the national government, and the reducing of the state to the status of a subordinate. p. 140

“The political money system implies that the citizen will abate his natural money issuing power, and make the criterion of his exchanges and the regulation of the money system entirely dependent upon the government that he recognizes as the money power. By making the federal government the sole money issuing power, the individual states transferred the fealty of their citizens to the national government, because they became thereby dependent upon its money power. The citizen having thus had his fealty transferred to the national  government—it was taken from the state governments—and the latter are now dismayed by the increase of federal power and the commensurate subordination of state power.”

“What has actually transpired is a reversal of the intent of the federal plan whereby the national government was to be dependent upon the states for grants of power. The national government, through its money power, is now supreme and in reality holds the state governments in subjection to it. Federal fiscal policy now determines the bounds of state sovereignty. It took many years to reveal this structural weakness because, in the earlier days of the federation, the economy depended more upon the private issuance of money through the banking system, and thus federal fiscal power was dormant. The policy of the federal government up to 1932 was to leave to the banks the function of supplying money. During the Jackson administration, with the abolishment of the United States Bank, government participation in money supply reached its lowest point—with the government confining itself to the mere minting of gold and silver coins at a seigniorage charge to any one who brought the metal to the mint.” pp. 140-141.

Money Power Is Sovereignty
The states, to recapture their independence and sovereignty, must look to their citizens who, in turn, must assert their sovereignty by exercising their inherent money power. It was right that the states should have surrendered their money power; but they should have surrendered it to their citizens, and not to another government. At the time the federation was formed the nature of the money power was not understood; and it was not realized that it is the essence of sovereignty. But we know now that it is and if we wish to preserve the federation and also home rule, we must now deal intelligently with the money power.

While the states have surrendered their money power, their citizens have not. The citizens have merely failed to exercise their natural powers against which there is no prohibition in either state or federal constitutions. This is not a political issue – requiring legislation or repeal of legislation, or constitutional amendments, or any official action – but it is, nevertheless, a profound political movement; because, as the people assert their money power, their natural intimacy with their state and local governments asserts itself – since there is no other power that can step between. Today, the federal government stands between the citizen and local government, and thus alienates him.

If our states are to develop their individuality and counter the stereotyping influence of a monetary dictatorship, if local government and private enterprise are to work out their natural virtues, if democracy is to prevail in business and government, and if our federal republican system is to survive, we must meet our problems by dealing with their fundamental causes – the political money system.”

To accomplish these broad and vital aims, the Governor or some other public official should take the leadership of this cause within his state. In the absence of this, leadership must be taken by private citizens. It offers an incomparable opportunity for public service.”

While the money issuing power is inherent in every man, it can be realized only by a pact among many. Therefore, the individual is helpless, and organized action is necessary. The method of organizing a Valun Exchange should be no different from organizing any other cooperative movement.” pp. 143-144.

#     #     #

The true pathway to peace, prosperity and freedom

For the past four decades E. C. Riegel has been my primary source of insight and

E,. C. Riegel

inspiration on the concepts and mechanisms of money and exchange. Writing mainly from the 1920s thru the 1940s, his is vision is acutely penetrating and his expression clear and almost poetic. For that reason I and a few others have made every effort to make his work known to a much wider audience. His most important works are freely available to be downloaded and I have listed the web links on my website under the Library menu item at https://beyondmoney.net/library/.

I realized very early in my peace and justice work, that the primary obstacle to peace, justice, and freedom, lies in the centralization of power and the concentration of wealth. Riegel and others helped me to see that the global money and banking system is the main instrument by which that is made possible. Riegel opened my eyes to the true nature of money and the fact that we the people already have in our hands the power to create true money. He pointed out that “Heretofore, economics has located the source of production at one point and the source of money at another, with the result that synchronization and balancing of issue between wealth producing power and money power were impossible.” Riegel then laid out a way to bring those two powers together, a plan which I, in all modesty, have enhanced and adapted to present conditions.

I’ve lately been in the process of preparing a document containing excerpts from Riegel’s 1944 book, Private Enterprise Money, along with my comments, much as I did years ago with my annotated précis of his book, Flight From Inflation. That may take a while to complete but I would rather not delay in sharing with my readers a little gem from pages 106 in which Riegel presciently described our present predicament. Here it is:

THE SURPRISE WEAPON

Society is in the twilight of a passing day. The state now undertakes to finance the economy, and, since a free economy is manifestly impossible where the state assumes the responsibility of supplying the money circulation, the politician is compelled to choose between fascism and communism. Under either choice liberty is abolished and the people are enslaved. As the planners all over the world adopt their devices for a managed economy, and ideologists and sloganizers prepare their implements to condition the minds of men to their control plans, and the cause of human freedom seems defenseless, there falls into the hands of the people a surprise weapon that will turn the tide of battle and give the people mastery, not only over their private affairs, but over the would-be political planners. This weapon is the people’s money power as defined in the following pages. It will change the whole course of human events into the paths of liberty, prosperity and peace.

#     #     #

Who’s Left, who’s Right, and who should issue money?

I have in my possession, a copy of a copy of an essay by E. C. Riegel, one of many that I gleaned from the files of Spencer MacCallum who had the foresight to rescue Riegel’s literary legacy from oblivion, and the good sense to make his insightful works on money and freedom generally available. The article titled, The Right Is Still To Come, is transcribed below. It bears no date, but I would guess that it was probably written sometime between 1945 and Riegel’s death in 1953.

In the very first paragraph, Riegel sets forth the essential target of his argument, saying, “The professed socialists and the professed anti-socialists are united as monetary socialists in the common superstition that money springs from the State.” I long ago took Riegel’s argument to heart and have taken up the cause of dispelling that superstition, most notably in Chapter 8, The Separation of Money and State, in my book, The End of Money and the Future of Civilization.

I personally try to avoid using imprecise terminology and political clichés that are emotionally charged and tend to get in the way of rational thinking. Riegel, on the other hand, can be forgiven for some slight indulgence in political rhetoric that seems to us perhaps judgmental and outdated.  Keep in mind that he lived in tumultuous times that were scarred by two world wars, the great depression, and the rise of totalitarian governments bearing the various labels of fascist, communist, or socialist (any critique of Capitalism in the west at that time was overwhelmed and suppressed in a number of ways). These are the terms that defined people’s loyalties, as nations contested violently with one another to decide how people should be governed. The reader should not be put off by Riegel’s framing his arguments in terms of left, right, socialist, capitalist, and collectivist. His writings clearly show that he was, after all, a champion of peace, freedom, and social justice.

The emphasis of particular sections in the following essay has been added by me to highlight major points.–t.h.g.

THE RIGHT IS STILL TO COME by E.C. Riegel

On the left stands the socialist, back of him stand a hundred capitalists.  All society is composed of conscious and unconscious socialists.  The professed socialists and the professed anti-socialists are united as monetary socialists in the common superstition that money springs from the State.  The birth of the Right awaits disillusionment from this all-confounding fallacy.

There are advocates of many different money reforms but none renounces the basic error of the socialization of the money system.  To none of the believers in free enterprise does it seem incongruous to leave the State in complete control of the medium whereby free enterprise must articulate.  The right to freely contract and the sanctity of contract is seen as cardinal to free enterprise.  Yet, to leave to the State the power to alter contracts by altering the meaning of the money unit in terms of which all contracts are expressed, does not seem to professed capitalists contradictory.  Thus the State exercises its most vicious interventionism by making itself a party to all contracts, an unbidden and perverting party.

Some would limit, by various devices, the amount of “money” the State should issue.  Others would limit the amount of “credit money” that business men should issue.  Still others would abolish the later entirely, counting only government issues as genuine money.  None would abolish so-called money issues by government, leaving the money issuing power to the only true issuers, the private enterprisers.

With monetary socialization accepted, the choice is confined to different methods of perversion.  There is no monetary Right and since free money is basic to a free economy, there is no philosophy of the Right.  To merely complain against the drift toward socialism does not make one a true anti-socialist.  To propose or support political money reforms does not make one’s surrender to socialization any less abject, nor betrayal of free enterprise less vicious.

The trend toward socialism was set when business men accepted the cry, better called superstition, that money issuance and control are functions of political government—the political money system.  That fallacy, until exploded, makes the progressive socialization of the entire economy inevitable.  The pace of this perversion is not determined by the amount of resistance offered by the alleged opponents of socialism, but by the degree that the State indulges its perversive power by emissions of false money into the blood stream of business.

The pace of this perversion is quickening all over the world; a huge flood of water-money threatens to inundate all.  Can we preclude disaster by bringing those who call themselves anti-socialists over from the Left to the yet unoccupied Right?  Can we induce businessmen to think and act in terms of the economic means rather than the political means?  Can we build an economic statesmanship?  In short, can we sell capitalism to capitalists?  If we can we will save private enterprise and the social order.  If not, the deluge.

Painful as it may be to change habits of thought, (if indeed, prevailing money ideas can be called the product of thought) the triumph of free enterprise over socialism and tyranny can be accomplished only by the renunciation of the fallacy of political money power and the assertion of exclusive power of private enterprise to control and issue money.  When we realize that the political money system has operated almost from the beginning of money, it may be seen what a break with tradition this proposal involves.

The long existence of the political money system does not, however, imply continuity of operation or vindication.  There have been countless instances of the breakdown of national money units through excessive dilution of the money stream by the State.  All money circulations have been a mixture of genuine money issued by private enterprisers and spurious issues by the State.  Following these breakdowns the State set up new money units and repudiated the old.  During the transition from the old to the new, exchange has been kept alive by resort to other national units that were still relatively stable.

What makes the present inflationary crisis unprecedented is the universality of the decline of political money units and that the U.S. dollar, the strongest unit, is being subjected to blood transfusion to sustain other units.  Thus the superstructure of the entire political money system is being bolstered by timbers taken from the foundation with the ultimate result that the whole structure will collapse together.  It is therefore imperative that we change superstitious money ideas for rational ones before it is too late to avoid worldwide chaos.

Why no State Can Issue Money

To understand money is to understand why it cannot spring from any government, national, state or city.

The purpose of money is to obviate the necessity for contemporary delivery of value by both parties to an exchange transaction and thus greatly expand exchange.

By means of money its issuer is enabled to purchase values from any supplier, who, in turn, is enabled to do likewise, the money ultimately reaching a supplier who has need of the issuer’s values and thus the reciprocating trader is found and exchange is completed and the money retired.  Account is balanced by passage of value both ways, the medium, money, having no value.

Money can be issued only by a buyer who later, as seller, redeems his issue.  He must, to stay in business, bid for money with value because that is his only way of gaining income. He must price his values competitively or he can make no sale.  Thus, by his circumstance of being a private enterpriser he is ideally suited to issue and redeem money.

Contrast the State’s situation.  It is not a trader; it does not sell.  It needs not bid for money; it merely requisitions it by taxation. Since it has no way of redeeming money by open competitive bidding, it cannot issue it and its professed money issues are inescapably spurious.

The power and need to issue money is inherent in private enterprisers and thus it operates under natural checks and balances, while to the State it is entirely unnecessary and unnatural and no amount of fixing can supply the requisites that it lacks, nor is there the slightest reason for undertaking such artificiality.  The State would never have gotten into its present unnatural position of its own necessities, for, it always had its taxing power, before the advent of money, to levy in kind and under money exchange to levy on money.  It was forced into its anomalous position by the ignorance of businessmen who, not understanding money resorted to the superstitious belief that it needed the State’s imprimatur.

In spite of all the abortiveness of the political money experience professed friends of private enterprise and self-styled anti-socialists continue their efforts to perpetuate it by added gadgets.  None has contributed in the slightest degree toward liberating private enterprise from it.  Private enterprisers do not even know that, as bank borrower they are money issuers.  They think that their participation in the money system is a secondary one and that even this depends upon a grant from the State.  The truth is that every money unit ever issued has come from private enterprisers and that no money has ever or ever can be issued by any state.  The only thing that makes it possible for the delusive political money system to operate at all is that the true money issued by businessmen serves as a host for the parasite issues of government to feed upon.  No government could build a money circulation of itself anymore than a farmer can produce watered milk from the pump alone.  In this metaphor government is the pump and private business is the cow.

How the political Money System Sabotages Private Enterprise

Every businessman knows that stock splits involve an increase in the number of shares without an increase in capital.  What he does not understand is that so-called money issues by government are but money splits involving merely an increase in the number of units without an increase in the money supply.  The analogy ends there.  In stock splits the corporation does not rob the stock holder.  In the process of money splits the government issues them by taking goods and services out of the market, thus robbing the economy, thereby depreciating the power of each money unit.  This is called inflation and inflation is in turn defined, naively, as “too much money chasing too few goods”, whereas it is but the same amount of real money mixed with spurious money with the economy robbed in the sum of the spurious money.

With the so-called capitalist world deluded into thinking that what government issues is money, the process of sabotaging the economy has open sesame.  It enables the State to practice paternalism and paternalism is the mother of socialism.

#     #     #