I have long credited E. C. Riegel as the foremost authority in shaping my understanding of money and the process of reciprocal exchange. His penetrating insights and proposals for a new independent system for the exchange of value have provided a solid foundation for my own work of developing improved exchange mechanisms that I consider to be crucial to the future of civilization.
Riegel’s book, Private Enterprise Money, published in 1944, is perhaps the most complete and concise statement of his insights and proposals. For that reason I have undertaken the task to extract what I consider to be Riegel’s most important insights, interpret for the contemporary reader the passages that seem difficult to understand, and articulate the few points on which I disagree with Riegel. With that said, I urge every serious student of money and exchange to read Riegel’s book, Private Enterprise Money, in its entirety, as well as Riegel’s other works which are available to be freely downloaded from my website, BeyondMoney.net.
When the division of labor has been once thoroughly established, it is but a very small part of a man’s wants which the produce of his own labor can supply. – Adam Smith, Wealth of Nations.
We have become so accustomed to using money to get the things we want and need that most people find it nearly impossible to conceive of any other possible way. Whenever I tell people that my work is about exchanging goods and services without using money they invariably ask, “Oh, you mean barter?” Then I go on to explain that barter requires a coincidence of wants between two people — I must have something you want, and you must have something I want. No, we must think beyond barter.
Through intensive study of monetary history and exchange principles extending over a long period of time I’ve come to a deeper understanding of theexchange process and the possibilities for advancing beyond our present dysfunctional and destructive monetary system.
“Mutual credit clearing” is a process that enables producers to trade goods and services directly among themselves without the need to use money. The credit clearing process is not a new invention; banks have been using it for a long time to settle accounts among themselves. But businesses can also use it to trade with one another and settle accounts among themselves, and they have been doing so for the past several decades. There are now scores of commercial “trade exchanges” operating around the world to provide credit clearing services for their tens of thousands of member businesses. While these exchanges are often referred to as “barter exchanges,” they do not do barter in the conventional meaning of the word. Rather, they utilize the collective credit of the members themselves as the internal payment medium. Members earn “trade credit” when they sell goods or services to another member, and they spend trade credit when they buy goods or services from another member. It is a simple process of accounting for value given and value received. When a member sells something their account is credited (increased) and when the buy something their account is debited (decreased).
What enables the system to work is the fact that some trusted members who offer for sale goods and services that are in high demand are allowed to spend trade credits before they earn them. In other words, these trusted members are given a line of credit against their future sales; their account balances are allowed to be negative, up to some predetermined limit that is based mainly on the amount of value they are ready willing and able to sell to the other members.
Here, in a minute and a half, one of the major trade exchange operators explains the processes in its utter simplicity:
Note, this is not meant to be an endorsement of Bartercard or any other company. I refer to this video only as a good description of how credit clearing works to enable producers to trade among themselves without needing to make payment with conventional money, nor the need to borrow from banks.
And in this video a member of another trade exchange describes how credit clearing works for his business:
Properly organized and managed mutual credit clearing exchanges provide an effective, stable, and sustainable means of creating interest-free local liquidity and enabling companies and individuals to enhance their opportunities for success despite the adverse policies of banks and governments.
It is almost laughable to see “the powers that be” fumbling around, and bending everything they touch out of shape, as they try to maintain some semblance of life in the deeply flawed zombie system of money, banking and finance. Laughable, that is, if it were not so tragic.
This financial “Titanic” has not been ripped open by a sudden encounter with some unexpected and random “iceberg.” It was doomed from its very beginning because of its flawed design, construction, and operation, which I have repeatedly described over the past thirty plus years.[i] It has been taking on water and shaking itself apart for a very long time, but it is just within the past few years that its inevitable demise has become obvious, and is now imminent.
The International Reciprocal Exchange Association (IRTA), the premier association of the commercial “barter” industry, has been for more than forty years promoting the interests of small and medium sized enterprises by assisting its member trade exchanges to provide them with liquidity and effective opportunities for moneyless trading.
Since 2005, IRTA has been reaching out to the wider grassroots community of researchers, developers, and organizers of private currencies and complementary exchange mechanisms and has broadened its advocacy to include them.
The upcoming 34th Annual International Conventionof the IRTA in Las Vegas will provide a unique opportunity for social entrepreneurs and monetary activists to further consolidate programs of cooperation with the well-established commercial “barter” sector of the moneyless exchange movement. The Convention will be held from Sept. 19 thru 21 at the Venetian Resort in Las Vegas.
Along with IRTA President and experienced trade exchange operator Annette Riggs, and Rob van Hilten, Executive Director of QOIN, a consultancy for community currencies, I will be a panelist in a Saturday session (September 21) titled Understanding Diverse Exchange System Models: From Bitcoin and Berkshares, to Transparent Credit Clearing Networks. This session will consider three basic topics of discussion:
Bitcoin, the good, the bad, and the ugly.
The benefits and limitations of cash-based local currencies.
The emerging global exchange network.
There is still time to register for this important event. You can get details about the convention program and secure your place by visiting the IRTA website at http://www.irta.com/.
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