Dedicated to Linda, Aoife

and Niamh Quigley

Social Credit
and Money

by

Christopher M. Quigley
B.Sc., M.M.I.I., M.A.
















Copyright (c) 2012

Christopher M. Quigley

All Rights Reserved



Table of Contents
Chapter 1.
Introduction.

Chapter 2.
Henry Ford and Social Credit.

Chapter 3.
Understanding Social Credit.

Chapter 4.
The Monetary Theory of E.C. Riegel.

Chapter 5.
Meta-Economics.

Chapter 6.
How to Start a Local "Natural Money" Circle.

Chapter 7.
Natural Money



Chapter 1.
Introduction.

The current world of economics is in crisis. The crisis is man made.

There is a fatal flaw in the money system. The British engineer Major Clifford
Douglas understood this flaw and brilliantly expounded a solution: he called it SOCIAL
CREDIT.

The only way this solution can be implemented is if each and every one of us takes
personal responsibility to understand what social credit is all about and spread the word.

This slim book is compiled of a number essays that I have written explaining Social
Credit in language everybody can understand. Once you experience the "epiphany" of
Social Credit and the scales of contemporary deception fall from your eyes your life will
never be the same. I invite you to this epiphany.

I have also included three other essays by E.C. Riegel, Silvio Gesell and E. F.
Schumacher as their theories will help to expand your conception of money and economics.

Ideas have no value without action. If the message of Major Douglass does get
through to your consciousness please talk to other people about this most important topic
and make a difference because what you think, what you say and what you do, matters. To
quote the Social Credit author, M Gordon-Cumming:

"I trust, however, that you will find it worth your while to master the not very
difficult outlines of the present financial system. You will then discover why your standard
of living is tending to decline, or at any rate to fall behind the ever increasing productive
power of industry. You will also learn why yourself, your sons and your daughters will
almost certainly be involved in another world war. (This book was written in 1935.) The
understanding of this point (concerning the meaning of money) can be shown to be of vast
importance. Indeed it is not an exaggeration to say that the future of civilisation depends
upon a rapid realisation of the true facts of the case."



Chapter 2.
Henry Ford and Social Credit.

Our world lurches from financial crisis to financial crisis yet very few academics,
reporters or commentators point out the fatal flaw in current orthodox economic theory
which is the central force behind these crises. The flaw relates to the general LACK OF
PURCHASING POWER in contemporary society. As was explained by Major Clifford
Douglas in his theory of Social Credit this weakness in classical economic theory is not new
and many scholars have explained the problem however, increasingly the solution is being
conditioned out of peoples consciousness. The collapse of the international banking system,
as a result of the banking crisis has brought this Achilles heel of Keynesian economics into
sharp focus. The elite fear that the prospect of a greater depression will force change that
will eliminate their position of control and privilege. Hence the current spin emanating
from controlled media outlets.

What is the main objective of Social Credit? In essence it seeks to fairly compensate
citizens with real purchasing power and thus end the current "trans-national/robot out-
sourcing" industrial policy of American and European business leaders. It seeks to replace
capital investment with human investment. Why? Because robots though they do the work
have no money. They do not buy cars, raise families, and care for the well being of elderly
parents. Robots do not use shampoo, eat food or watch base ball. They do not babysit
grand-children or change diapers. They do not munch a candy bar or scoff a pizza.
Therefore if robots end up doing all the work who has the money to consume the products
they produce? Americans and Europeans must stop looking on their nations simply as
mechanical economies and start to see them in simple human terms. Irish citizens must
wake up and smell the conceptual corruption in contemporary European Union economic
policy.

Why is purchasing power so important? It is fundamental because without money
no exchange can take place. In order to understand what I am talking about let us look at
the historical example set by Henry Ford in 1920. He completely redefined "classical"
economics through the policies undertaken by the Ford Motor Company.

Under "normal" economic theory it was assumed that a corporation could only
maximise profits by ideally becoming a monopoly which meant increasing price and
limiting supply. Ford did the exact opposite. He had a more holistic view of the role of the
corporation in society. He understood the synergetic relationship between money and
goods. He DOUBLED the wages of his workers, DECREASED the price of the Model T
and in the process remade the Ford Motor Corporation and remade America. (This policy
was not inflationary because he knew he could at least double production through
increased efficiencies when he doubled wages. This is the essence of the enlightened policy
of Social Credit for communities rather than of monopoly credit for social elites alone).



The Ford Company boomed. How did this happen? It was axiomatic. He
understood the importance of money and purchasing power in society. With "high" wages
Ford's workers were able to make a good living and have excess funds to save or spend.
Accordingly their financial anxiety ceased and staff turnover dropped by a multiple of five
in one year. This dramatically decreased management expense and increased productivity.
Workers finally had peace of mind. With the increased disposable income in the Detroit
area the general economy boomed. All classes of economic sectors expanded. As a result
more workers, new business owners, company managers, insurance brokers, real estate
brokers, bankers, salesmen, craftsmen, delivery men, builders, farmers and retailers all
could afford Ford cars. Demand for the model T exploded through the increased buying
power WHICH HE HAD CREATED THROUGH MONEY DISTRIBUTION.

Like Major Clifford Douglas Ford understood economics and he understood the
issue of PURCHASING POWER. FOR HIM PURCHASING POWER WAS NOT
CREDIT BUT CASH. HE REASLIZED THAT WITHOUT THE MONEY TO
PURCHASE HIS CARS POTENTIAL DEMAND WAS IRRELEVANT. THEREFORE
HE INITIALLY REDISTRIBUTED DIVIDENDS FROM THE OWNERS TO THE
WORKERS. THIS INCREASED GENERAL BUSINESS ACTIVITY AND TURNOVER
EXPONENTIALLY. THESE INCREASED SALE BOOSTED PROFITS TO SUCH A
DEGREE THAT THE SAME OWNERS EVENTUALLY RECEIVED INCREASED
SUSTAINABLE DIVIDENDS. EVERYBODY WON. THIS BRILLIANT POLICY MADE
THE COMPANY. It built up the economy of Detroit and it helped define America as a
country where a factory worker was respected and well paid, not exploited, as had been the
case throughout the English industrial revolution. The "American Dream" was Fords
vision made manifest. It was a dream brought to fruition not through political fantasy but
through the hard laws of economics, accounting, finance, production, distribution and
marketing. As Ford said in his "Life and Work":

Power and machinery, money and goods, are useful only as they set us free to live.
They are but means to an end. For instance, I do not consider the machines which bear my
name simply as machines. I f that was all there was to it I would do something else. I take them
as concrete evidence of the working out of a theory of business, which I hope is something
more than a theory of businessa theory that looks toward making this world a better place in
which to live. The fact that the commercial success of the Ford Motor Company has been most
unusual is important only because it serves to demonstrate, in a way which no one can fail to
understand, that the theory to date is right. Considered solely in this light I can criticize the
prevailing system of industry and the organization of money and society from the standpoint
of one who has not been beaten by them. As things are now organized, I could, were I thinking
only selfishly, ask for no change. I f I merely want money the present system is all right; it
gives money in plenty to me. But I am thinking of service. The present system does not permit
of the best service because it encourages every kind of wasteit keeps many men from getting
the full return from service. And it is going nowhere. I t is all a matter of better planning and
adjustment.




Compare for one moment the circumstances in Detroit in the 1920s and mainstream
America, Ireland and Europe today. The exact opposite is occurring. Meaningful wage
levels are being destroyed. Real buying power is contracting due to systematic out-sourcing
of real jobs and the misguided use of capital investment to destroy human potential. No
jobs or low jobs means there is no money circulating to consume what is produced. The
system contracts and cannot hold. The cycle, once started, feeds in on itself resulting in
deeper and deeper deflation. Society slowly but surely hollows out from the inside. All the
while, as is so apparent in Ireland, folk do not fully understand the total implications of
what is happening due to "dumbed down" educational policies. To replace falling wage
(money) levels the banking elites have tried to substitute credit. This credit switch from
previously hard earned cash is an unstable arrangement because debt is very expensive and
is non-liquidating other than through savings, bankruptcy, lotto wins or death. This is no
way to run nations as it is totally unsustainable and unstable. It creates constant anxiety
and eventual destitution and depression among citizens. It is particularly ineffective now
that most banks are actually insolvent and are no longer in the position even to provide
credit in the form of business loans, credit card facilities, car loans, overdrafts or home
equity draw-downs.

Thus in essence the solution to "the problem" in Ireland and Europe as a whole
for that matter, is enlightened redistribution of purchasing power. Currently too much
power over such redistribution is controlled by banks and associate entities. This money
centralization is stagnating the system and the fact that this arrangement failed to regulate
itself, and caused a credit collapse, has accentuated the speed of failure by multiples. It is
time to change. Society must move on. The intellectual framework to effect this change as
demonstrated by Ford, and Douglas has been known for over 80 years. Its successful
implementation today would bring a renaissance to general commercial and societal
development. There is no more important function for academia today than to disseminate
this vital economic truth. To the elites, who must know the truth, this monopoly credit
based boom-bust phenomenon is obviously allowed to continue because they have control.
Their ownership motivates them to disregard consequences provided they are protected
through privilege.

However, I believe that the truth is too odious to ignore anymore. The end result of
the current regressive financial policies is the on-going development of a modality which I
call: Techno-Feudalism. This Techno-Feudalism is bringing with it vast disparities in
wealth, ownership and opportunity. It is leading to the eventual obliteration of the middle
classes in developed nations. It is allowing global corporations engineer the slow Fabian
demise of effective democratic institutions as increasingly corporate boardrooms rather
than governments are defining peoples destinies. Untamed it will break traditional social
cohesion and lead to mass unrest, depression and despair. Is this not exactly what we are
witnessing in Portugal, Spain, Ireland and Greece as we speak? But the future does not
have to be so bleak. The monetary solution of increasing actual purchasing power for
average Americans and Europeans is so obvious it is madness not to sort it out. The truth
must be allowed to break free.



The organism has a right in natural law to draw sustenance from its environment. We
cannot with impunity abstract humanity from the natural world. . Unfortunately, the
present financial system creates an ever greater deficiency of effective and unattached
purchasing power giving the illusion, through a distorted financial lens, of actual or physical
scarcity in the midst of actual and potential abundance..
Wallace Klinck, Social Credit Author

In the 1930s the engineer and self-taught economist Major Clifford Douglas claimed
that society was intellectually hypnotized and that only a drastic de-hypnotization and re-
education could save it. Douglas believed in people. He felt that individuals had far more
goodness and potential than society was allowing them for. He reckoned that if common
folk were given enough freedom and leadership they could move society and civilization
into a new age. An age of extended liberty, discovery, art and culture. The alternative he
felt would be booms, busts, over-consumption, under-consumption, excesses, depressions
and wars. Eighty years later this is exactly what the world has experienced and is
continuing to experience. However, the period between each stage is narrowing and the
level of debt, instability and inequality are exploding beyond comprehension. To Social
Credit followers of Douglas this situation is not happening by accident; it is happening
inevitably because the conceptual flaws of the monopoly of credit and the fabricated
scarcity of money was allowed to be perpetuated by a privileged banking class.

The enlightened monetary and economic policies of Henry Ford and Clifford
Douglas are heartfelt attempts to bring about conceptual revolution to historical economic
orthodoxy. It is incumbent on all interested parties who desire to solve this problem of
problems to become educated and aware of the available solutions and to actively
participate. Not to do so will allow the current greater depression to expand and gain a
greater grip on economic activity. History shows that such a development will eventually
lead to escalating strife as sure as night follows day. For those of us who wish to reject
regression in favour of progression we must strive to free contemporary economic policy
from its death waltz with outmoded Keynesian monetarism. We must help economic
orthodoxy move on, sanity demands it. The knowledge is there in Social Credit policy let us
utilise it.


References:
"Social Credit"
Major Clifford Hugh Douglas

"My Life and Work"
Henry Ford
In Collaboration with
Samuel Crowther



Chapter 3.
Understanding Social Credit.

"Banking and credit are too important a business for citizens and politicians to be ignorant of.
Upon its fair and equitable administration rests the very existence and future of our society."
Major Clifford Douglas
Every society has its orthodoxy. But there comes a time when the "accepted view"
no longer functions. When this occurs it is time for change. Study of the movement of the
stars and planets told Galileo that the earth centered Universe was wrong. The relative
inner stability of two moving trains told Einstein that Newton and Euclid were wrong. The
current financial crisis is an indication that the orthodox concept of banking and credit is
wrong.
This is not the first time that the failings of the accepted "credit concept" were
identified as being inappropriate in an increasingly technologically efficient world. The
great depression of 1929 also gave the same signal. However instead of dealing with the
cause only the symptoms were addressed. Accordingly, another world war ensued and
through "sticking plaster" policy modifications we bungled on for another 80 or so years.
Now, once again, the dormant "error" has become virulent and threatens the whole. The
disease within the economic body was diagnosed successfully in the early 1900's and a
solution was prescribed but ignored. The same remedy will work today but its successful
application requires a "Copernican" change in economic conceptional modalities. The
world was not ready then. Is it ready now? The cure is called: "Social Credit".
Due to developments in technology and technique the age old problems of
production and scarcity have been all but solved, the issue now is one of distribution.
Money creates effective demand and orthodox banking and accounting rules makes money
scarce. This state of affairs if allowed to continue will result in:
1. Expanding world production due to technological efficiencies.
2. Unemployment and under-employment due to changing work modalities.
3. Wholesale wastage of productive capability due to lack of purchasing power.
4. Redundant industrial machinery and social structures.
5. Consequent cut-throat competition.
6. Disappearance of industrial profits due to obsolesce of capital.
7. Consequent business bankruptcy and depression.


8. Aggressive competition for foreign markets.
9. Consequent international friction and war.
In order to prevent the above constantly recurring, as in 1929 and now with the
global banking crisis, it is necessary to change our orthodox view of economics. WE MUST
MOVE FROM AN OUT-DATED MINDSET. Social Credit, as policy, demands that
purchasing power be distributed to citizens, so that the efficiencies inherent in
technological advance are actually available for use by the majority in that society. This
does not require a revolution it simply requires a reorientation in our consciousness.
However the elite who control the ownership of the "orthodox" credit myth will not allow
application of this alternative policy because to do so will weaken their system of ownership
and domination.
However truth is an amazing thing. Slowly but surely, like a seed whose hibernation
is over, the practicality and benefit of the concept of Social Credit is growing. But it needs
aware and dedicated followers to nurture this growth. MONEY MUST NOT BE
REGARDED AS A COMMODITY. IT IS IN ESSENCE A MEANS OF DISTRIBUTION
OF SOCIAL PRODUCTIVE CAPACITY. AS A RAILWAY TICKET IS TO A TRAIN
NETWORK THE DOLLAR BILL IS TO THE ECONOMIC SYSTEM. THE
OBJECTIVE IS NOT TO OWN ALL THE TICKETS BUT TO HAVE A RAILWAY
SYSTEM THAT SERVES THE FUNCTION OF MOVING PEOPLE AND GOODS.
Through our ignorance of banking and credit, politicians have allowed an elite professional
group corner the market for "railway tickets" and thus control the "transport network".
For the current economic crisis to be finally resolved the realisation must sink in
that BANKING IS NOT SIMPLY AN AVERAGE BUSINESS LIKE ANY OTHER.
The word credit comes from the Latin word "CREDERE", meaning "TO
BELIEVE". The essential quality of money, therefore, is the belief that one can get what
one wants when one possesses it. THUS MONEY IS A SOCIAL CONTRACT BASED ON
TRUST AND MUTUAL BENEFIT. This contractual structure belongs to the association of
society not any corporate oligarchy. A society cannot allow a particular grouping to have a
monopoly on the functioning of this social contract because ultimately this group will end
up monopolizing all contracts. If you own the contracts you will end up owning society.
The central problem which Social Credit addresses is the negative consequences
resulting from the increasing use of capital to the detriment of labour in manufacture and
distribution. This drive towards capital intensification brings efficiency but it decreases the
requirement for labour. With the loss, or through the down-grading, of "jobs", the trend is
for higher unemployment and/or under-employment. With under-employment there is
diminished purchasing power in the economy thus the true potential capacity of modernity
cannot be attained because there is no effective demand, since desire without money is
meaningless in our current system.


Social Credit strives to solve this spiral of lower employment, lower wages, recession
and depression by increasing effective demand in the system by generating societal
purchasing power. Purchasing capability is increased through a social dividend and the
adjustment of prices. It proposes that the ownership of credit reside with the society rather
than with a monopoly group. Social Credit would not abolish banks. On the contrary,
Social Credit believes in banking but does not accept monopoly ownership of credit and
legal tender. The policy objectives of Social Credit are as follows:
1. Money and credit to no longer be "commodities" controlled by banks and
selective elites.
2. Boom and bust credit cycles to be negated.
3. The ordered distribution of stable purchasing power based on solid economic
principles to allow for the effective production and distribution of goods and services.
4. The promotion of family and community based businesses.
5. The diminishment of "Corporatism" through the curtailment of non-productive
credit.
6. The development of a real economy thus mitigating the current Wall Street trend
towards an economy based on gambling, speculation, leverage, derivatives and other
accounting products.
7. The downsizing of big government and a curtailment of deficit spending and high
taxation.
Many folk have attacked these objectives as idealist or socialist. They are wrong;
these objectives are based on community not the commune. But that is the point. Social
Credit strives to reaffirm the supremacy of human association rather than abstract
institutionalism. Capitalism (under our current banking arrangements), communism and
corporate-socialism are all "Cesarist" theories of society; they end in monopoly ownership
of everything. This monopoly results in the "state" or "core political group" being master
of the individual. As a result community dies and corporatism thrives. The philosophy of
Social Credit is the exact opposite. It believes in the individual and it aspires to provide the
individual with as much freedom as possible. It acknowledges that the STATE SHOULD
EXIST TO SERVE THE INDIVIDUAL: NOT THE OTHER WAY ROUND. Social Credit
therefore rejects the dialectic materialism of capitalism/communism/socialism. It believes
in true freedom not a conceptual equality that is actually a facade. This facade was alluded
to bluntly by an unemployed Greek student in Athens last week with his simple statement:
"no money, no life."
As this financial crises festers and invades the social, economic and political body of
America and Europe I hope that more and more like minded people will become focused,
educated and aware in this matter. There is no more important goal in life than actively


participating in the growth and development of one's spirit, one's family, one's community
and one's nation.

Social Credit is part of this solution. Its arguments, while not a panacea, do offer a
very valuable framework for solving for once and for all the conundrum that technological
development cannot become available for use by the majority unless a just way is
discovered to distribute purchasing power into the hands of the citizen made "redundant"
by that technology. Major Clifford Douglas, a world class engineer, discovered a way to
this without destroying banking or causing inflation. Many have said that his discovery of
Social Credit, and the strategy he propounded, qualified him as a far superior economist
than Mises or Marx or Keynes. Maybe with the advent of the greatest banking crisis since
the great depression his time has finally come.

References:
"Economic Democracy"
Major C. H. Douglas
Bloomfield books
"Aladdin's Lamp: The Wealth of the American People"
Gorham Munson
Creative Age Press: New York



Chapter 4.
The Monetary Theory of E.C. Riegel.

Introduction:
In a life spanning over 70 years, one of the greatest students of money, and its
meaning, was the American E.C. Riegel. Many regarded him as a genius for his
understanding of the nature and functioning of money as a human and social institution.
This essay is a direct introduction to his main ideas on this subject, as, increasingly, people
are beginning to realise the need for a more stable monetary unit. In his book "Flight from
Inflation" he identified money as the mathematics of value and argued, that for a
democracy to thrive, he believed the "money power" must be free. He basically viewed any
political economic monetary system as socialist. For this reason he was at odds with Adam
Smith's view of the World. Indeed, he felt that Smith in his "Wealth of Nations" pre-
empted Marx as a social theorist. Regardless of his views, Riegel has come to be respected
for his unswerving belief in mankind and his heroic efforts to champion practical freedom
based on the realities of exchange systems, which are based on value.

Freedom is Exchange:
The freedom of exchange is the foundation of all freedoms, and the freedom of
exchange unencumbered is the truest democratic freedom of mankind. Civilization began
with exchange, and exchange began with whole barter i.e. things traded for things. The
first improvement on whole barter was indirect barter. This was the practice of utilizing
commodities of common use as reserves to be later traded for items of immediate need.The
adoption of precious metals, such as gold and silver, developed this trend. This step
reflected a growing emphasis upon facility in exchange. Accordingly, through the passage
of time, a new means of completing transactions arose through the practice of depositing
precious metals with goldsmiths, who in turn issued warehouse receipts. Such pieces of
paper became negotiable through custom, and so purchases could be effected by their
transfer.

Acceptance of negotiable gold receipts, i.e. promises of future delivery, marked the
first real step toward the utilization of money. It was at this point that barter was finally
fully split into two halves, WITH THE BUYER RECEIVING VALUE AND THE SELLER
RECEIVING ONLY A CLAIM. This was the first faint glimpse of the tremendous
liberating power of money. We can also see that the ideal of money is to split barter
absolutely in half, without any limitations imposed upon the seller. Hence, we realise that
money is a device that operates within the trading community, for that community's own
self-interest. The necessity of splitting barter into halves in order to motivate trade is the
motivating force: sellers want to sell and buyers want to buy with the least amount of
inconvenience.

IN A COMMUNITY MONEY IS ISSUED BY A BUYER. Such a money issuer,
must, in exchange for the goods and services he buys from the market, place other goods or
services into the market. Thus money as a money instrument is evidence of a purchase that


is issued by a purchaser to the seller. Therefore, money is actually backed by the value
surrendered by the seller and potentially backed by a value in the possession of the next
seller. To print bills and mint coins is not to issue or create money. This has no more
monetary significance than if you were to write a cheque and leave it in your chequebook.
Instruments that have not been put into exchange are non-existent in the World of
exchange and money. Money simply does not exist until it has been successfully accepted in
exchange. In theory, two factors are necessary for money creation. A buyer who issues it,
and a seller who accepts it. Since the seller expects in turn to reissue the money to some
other seller, it will be acknowledged that money springs from mutual interest and co-
operation among traders and not from authority.

It is a fallacy to think that a government can issue money. Money can be issued only
by a buyer for himself, and he must in turn be a competitive seller to recapture it and thus
complete the cycle. This competitive co-operation for goods and services creating value in
the market is actually what makes money work. This competitive situation, in which the
trader redeems his original monetary issue, through the sale of his own goods and services,
assumes that the community's money will maintain its stability. All enigma as to what
causes money to circulate and maintain its power is thus dissolved by comprehending this
natural law of money issue. THIS LAW STATES THAT THE LEGITIMATE ISSUE OF
MONEY IS CONFINED TO PERSONAL ENTERPRISERS IN THE MARKET PLACE,
SINCE, THEY ALONE, BY THE LOGIC OF THEIR SITUATION, ARE ABLE
ISSUERS OF VALUE. Thus, in essence: money is issued by a purchaser, but it must be
issued by a purchaser who can, and is, prepared to issue value; it is a tradesman's
agreement to carry on split barter among themselves.

We see that money is the mathematics of value exchanged based on mutual
agreement. The monetary instrument is but the evidence of the consummated trade. It is a
mistake to attribute purchasing power to the instrument, for it has none. It is merely the
conduit through which purchasing power flows; such purchasing power lying in the
commodities or values exchanged. From this analysis we can deduce that commercial
banks do not "lend" money. They, in fact, permit the "borrower" to issue money. Once
given permission, the borrower now has the legal authorization to write cheques to the
extent of the loan and tender them in trade. UPON THEIR ACCEPTANCE BY A
SELLER, WHO IN FACT PROVIDES VALUE, new money has come into existence. This
money remains in circulation until such time as the borrower, through becoming a seller,
recaptures money with which to liquidate the loan.

From the premise of the natural law of money issue, it must be accepted, that
governments cannot qualify as issuers because they are not in the real situation of personal
enterprisers. They cannot qualify, as they do not barter. They do not bid for money in the
market place. Their taxing power relieves them entirely from selling. They take by taxing.
When they are admitted to the issue power, their issue cannot be a genuine promise to
deliver value in trade. It must, of necessity, be counterfeit, regardless of any statutory laws
intended to validate it. From this failure to discriminate between money issued through
bank credit by personal enterprisers and by governments, has come an inflationary
mixture of true and false money that will eventually threaten social order. Money cannot


be issued in perpetuity by man-made laws; it operates by its own natural law. To ignore
this law invites uncontrolled inflation.

The destructive force of inflation is not confined to its covert taxing power. This is
only its early manifestation. Its later destructiveness lies in its power to amend, and finally,
to nullify the contractual relationship upon which the social order depends. The whole
philosophy of freedom is encompassed in the single phrase; POWER TO CONTRACT.
While a small distortion of the unit of account impairs contracts previously written, a
consistent inflation actually destroys all existing contracts and prevents the making of new
ones.

Adam Smith in his political economy allocated the money power to the state, thus he
ante-ceded Marx as a socialist. It is his followers, unconscious socialists, and not those of
Marx, who constitute the greatest peril to the order of free exchange. The Smith philosophy
is taught in all the schools and colleges. Students become indoctrinated by this ideology
unaware that in its monetary concept it is contrary to the true philosophy of personal
enterprise and individuality. An unnatural monetary system begets unnatural economic
manifestations. How can a free economy work with the monetary system socialised?
Rampant inflation makes a mockery of any true accounting for any true contract. When
the future businessman discovers that his pride in cash was a delusion and a snare; that his
cash reserves, which he meant to freeze have melted and evaporated; that his balances
might have been preserved if they had been cast into materials; that his bonds and money
claims on others have shrunken and that he might have profited had he known enough to
get into debt; that his tax refunds are far less in power than those paid in; that he must pay
capital gain taxes on what are actually losses; then that businessman will realise that the
whole contemporary inflationary accounting picture is a delusion.

If money is issued under the natural law of issue, unit stability will be in evidence.
Under natural law, if exchange plays no tricks on us, we are all really working for
ourselves. We will all be interested in stability. In reality we are all buying for ourselves; we
are all selling for ourselves. But just exactly what is it we are buying and selling? In the
final analysis, it is simply human energy, mental and physical. Labour is the basic, or
virgin, commodity. It has no quality of obsolescence, for it is always associated with the
latest, and therefore, the timeliest products. IT IS THE ONLY VALUE. Others have
comprehended this, from the premise that all value is labour and since money is based on
value, they have reached the correct conclusion that money must be, in actual fact, labour.
However, the fatal error that labour money planners have made is that they set a measure
of labour, such as an hour, as a unit of value. While it is true that labour, both physical and
mental is the only value, and therefore, the sole commodity that passes through exchange,
IT DOES NOT FOLLOW THAT ALL LABOUR IS OF EQUAL VALUE. Labour may be
so unintelligently applied that it is completely worthless. We are all labourers, and
therefore, fountains of wealth because we all emit human energy. We must, however, direct
that energy to meet the demands of our fellow labourers. By the measure to which we
successfully respond to this demand will our energy be valued. Money is not a measure of
value, it is a method of stating a value that has already been determined through exchange.



If money is ultimately the mathematics of value set by exchange, what is value?
VALUE IS THE RELATIONSHIP OF DESIRE. It is arrived at in the mind by comparing
one thing with another. Thus what actually takes place in trading is the determination of
values and this mental process is the act of "moneyizing". It is a mathematical process. As
the act of "moneyizing" is psychological, so the act of "monetizing" is material. It should
also be noted that both arise out of and do not ante-cede, exchange. Trade produces money;
money cannot produce or induce trade. TRADE, LIKE MONEY, IS A SOCIAL
PHENOMENON BASED ON MUTUAL CO-OPERATION AND INTEREST.

In conclusion, value, mathematically compared, is money. The purpose of the
medium is to achieve split barter and to allow the monetary unit of exchange to be
universally accepted for any good or service. The discovery of the power of money as a
social mechanism has freed mankind and has been immensely influential in the
development of society and civilization. Its importance cannot be over emphasised.
However since 1909 the influence of government policy, both national and international,
has steadily brought about monetary debasement. Should the level of inflation currently in
place be allowed to continue, sound money will be driven out by bad "fiat" legal tender.
This problem will only be resolved when our leaders come to terms with the realisation that
there is a natural law governing the issuance of media of exchange, and if this law
continues to be broken by socialist ideology, the very bedrock of the western tradition of
freedom and individuality will be broken.



Source:
"Flight From Inflation;
The Monetary Alternative"
By E.C. Riegel,
Edited By ,
Spencer Heath MacCallum & George Morton,
The Heather Foundation,
Los Angeles, California.

Ref: www.reinventingmoney.com



Chapter 5.
Meta-Economics.

This brief essay is a summary of the idea "Meta-Economics" as introduced my E.F
Schumacher in his classic book; "Small is Beautiful."


Economic: Sufficient to give a good return for the money or resources expended.
Meta: To transcend or go beyond.

The neglect, indeed the rejection, of wisdom has gone so far that most of our
intellectuals have not even the faintest idea what the term could mean. But where can
wisdom be found? It can only be found inside oneself. To find it one must become liberated.
Through such liberation one can become relevant. Wisdom enables us to see the hollowness
and fundamental unsatisfactoriness of a life devoted primarily to the pursuit of material
ends, to the total neglect of the spiritual and the sustainable.

The influence of economics upon the management of government has grown
exponentially since the seventies. However, it is now being realised that the judgment of
economics is a most fragmentary one. Classic economic theory deals with demand and
supply but all contemporary demand and supply is exchanged through the medium of
money; fiat money. Due to the importance of stable money supply to the correct
stewardship of any economy no government should unduly tamper with its smooth
operation. To do so invites mayhem. As a result of catastrophic error, sub-prime crises,
derivative explosion, credit balloons, defunct regularity oversight, debt monetization, and
private credit exploitation the money supply has become so corrupted it is almost
impossible for anybody to make correct economic decisions. The historic" medium of
exchange" model has been broken. Fidelity with the integrity and the sacrifices of our
forefathers has been compromised by a shallow elite.

To get out of this "economic crisis" governments must now start thinking in Meta-
Economic modalities. Thus we must acknowledge that to sort out the mess we must go
beyond "classic" quantative economic thought. In the new paradigm, wisdom must prevail.
The fatal flaw of lack of adequate purchasing power, under the current "credit" model,
must be acknowledged. Without this conceptual breakthrough the crisis will never be
adequately solved.

Current economic thinking only touches the surface of things and takes for granted
so much that should be accounted for; i.e. clean air, fresh water, moral integrity of the
majority, faith in authority etc. etc. In a sense this quantative model promotes total
institutional selfishness and irresponsibility. This is all very well as long as there is no
systemic failure but, unfortunately, systemic crisis is exactly what we are now faced with.
Gross irresponsibility has taken the sacredness out of life. The macro crisis is not simply an
objective one. It becomes personal in the form of depression, loneliness, isolation,


meaninglessness, exhaustion, marriage break-up, atomization, pharma-medicinal
dependence, addiction and suicide. To bring about change in this zeitgeist quality must be
brought back into the quantative social model. We must strive to bring LIFE back to the
process of living. The formula for this is to reintegrate simplicity, integrity and constraint
into the functioning of our institutions, enterprises, thought processes and behaviour.
Patterns of action must be championed that honour human satisfaction on all levels not
just financial.

To comprehend mind-set differences between meta "quality as opposed to
"quantity, here are some examples:


1. Timely/Fast

2. Need/Want

3. Sustainable/Profitable

4. Community/Individual

5. Co-operation/Competition

6. Human/Mechanic

7. Resource/Factor of Production

8. Ideal/Practical

9. Shared Purchasing Power/Monopoly Credit

10. Free Medium of Exchange/Monopoly Fiat Control

11. Local/Trans-National

12. Art/Design

13. Education/Training

14. Process/Result

15. Authority/Power

16. Means/Ends

17. Order/Control

18. Tradition/Law



19. Common Sense/Central Law

20. Metanoia/Paranoia

For economics to become valuable and relevant again to sustainable society its
practitioners must realise the truth that economics is a social science and as such it deals
with human beings, not atomised ciphers. Rationality must reconstitute itself with morality,
ethics and philosophy. If national and international economists continue to lose these
classical thought centres, social disintegration will spiral out, uncontrollably. Governments
and economists must begin to see the whole picture again. We have foolishly and recklessly
abandoned our great Western-Christian heritage. The task now is one of metaphysical
regeneration. Economics must stop being taught where awareness of human nature is
lacking. We are suffering from a metaphysical disease and therefore the cure is meta-
physical: meta-economical. It is time for economics and accounting to grow up and
transcend there historical roots.



Chapter 6.
How to Start a Local "Natural Money" Circle.
1. Local Natural Money Circle Objective:
To establish a sound money unit with a constant purchasing power within a local group of
traders to so promote a more efficient circulation of money and thus increase business and
customer loyalty among the group.
2. The ideal entity to commence a money circle is a group of traders on one street or
those operating within a given "farmers" market or "flea" market.There should not be
competition of services within the group so formed.
3. Natural Money Issue:
It is important to keep things simple.

4. The issuance of printed money negates the need for excessive back office
administration.

5. Initially the group needs to agree the level of "credit" it will issue among itself
and prints up its own uniquely designed money. Ideally this money should have a seal of
recognition. This seal should be raised as with those used by incorporated companies. The
following words should be printed on the circle's money: "if the stamp is not raised this
money is null and void and not valid".

6. This money is then divided equally among the traders for issuance to customers
as an incentive to trade among the participating group.

7. The names of those businesses accepting the circle's money should be freely
advertised locally.

8. Backing for the Local Money:
As E.C. Riegel the great monetary theorist pointed out money can only be issued by
someone who can provide goods or service in return, thereby giving it value.

Thus it is the faithful goods and services provided by the traders in the money circle
which backs the money issued.

Therefore the traders who issue the money, to increase each other's business and
gain customer loyalty, must have faith in each other. They must limit the level of money
issued with due regard to their ability to provide goods and services in good faith when the
money is presented for "tender".

In essence the money so issued is "pooled credit".



9. Administration:
Structure:
The group is a self-help, not-for-profit, community co-operative and everybody
must share the work equally.

10. Expenses:
The costs of printing, support and administration should be borne by each trader in
direct proportion to the value of the money he/she issues.

11. As a community self-help co-operative where grants are available they should be
sought.

12. The group agrees to meet once a month where all matters pertaining to mutual
interest will be discussed.

13. All matters should be agreed to on the basis of one vote per issuing business
regardless of size.

14. All agreement must be on the basis of total consensus including the decision to
admit new parties to the money circle and the increase of money credit levels. On dates
where consensual matters need to be voted upon if issuing members cannot attend they
must present their vote to the chairman in writing prior to the meeting.

15. Administration is executed through the position of the chairman (chairwoman).
Assistance is provided by the vice-chair. Chairmanship and vice-chair of the circle should
be rotated on a strict six months rotating basis. The vice-chair automatically becomes the
full chairman in the subsequent 6 month cycle. In this manner training and support takes
place.

16. Minutes of the meeting should be kept by the vice-chairman.

17. Once a business has given full value for the quantity of money it originally issued
it is under no obligation to provide further value. Thus in order to maintain customer
confidence in the local money particular attention must always be borne to the level of the
"pooled credit" provided. There are a number of strategies which can initially be used to
mitigate this potential problem but the group can decide the optimum approach based on
its developing experience.

18. Learn As You Grow:
It is anticipated that the group should modify and improve the workings of the
money circle as their understanding of money and its potential to expand their business
and community grows. For example, if it so wishes, the group can introduce the monthly
depreciation stamp charge, as conceived by Silvio Gesell, but ideally this would suit money
circles that have grown in scale and magnitude.

Reference:


"The Natural Economic Order"
Silvio Gesell, 1929.



Chapter 7.
Natural Money.

In his classic economic treatise "The Natural Economic Order", written in 1929,
Silvio Gesell attempted to explain to his audience that many of the economic ills that were
befalling the world at the time were not due to problems with demand and supply, as such,
but with an erroneous understanding of money. He used a simple Robinson Crusoe and
guest anecdote above to show that a society which insists on "interest money to "allow"
exchange" was operating on an erroneous paradigm. The point of his story was to show
that in the "real world on a desert island" exchange would happen without "interest
money" because it would be in the best interest of the lonely islanders. If either of them
insisted on "money" to induce exchange they probably would both perish. Gesell felt that
society was indeed perishing because it was insisting on "interest money" to effect
exchange and as a result there "was poverty amidst plenty" throughout the "developed"
world. In his view society had allowed banking dynasties to obtain control of not only the
money supply but also the mental understanding of what money actually was. He, like the
American economist E. C. Riegel, believed money was perhaps the greatest social invention
of all time. However, misunderstanding had allowed an elite take over this invention for
their selfish gain. Thus Gesell observed that in the midst of plenty society was starving. (We
must remember that the book was written during the "great depression").

Gesell tried to educate his peers into the inner workings of money. He spent his life
explaining that money was in essence an agreement of mutual reciprocity. He understood
that the only entities who could naturally issue money were those that gave value in
exchange. Thus governments could never issue money; they could only exploit its natural
bounty. To him money was goods and goods exchanged was money. He believed that the
best money reflected the true nature of goods. He was therefore against "interest money".
He explained that if the money used by a society was "better" than the goods exchanged in
that society the holders of money would be in a stronger position than those who worked
and slaved to create the goods and services that gave money value. Thus he saw through to
the essential failure within general financial comprehension in vogue at that time.
Unfortunately this misunderstanding continues in contemporary society and is at the heart
of the current financial crisis that is bringing the European Union to its knees.



Natural Free Money:
To explain his ideas on natural money Gesell promoted the idea for the issuance of
"free money" by governments. By "free" he meant that the money was owned by the
people and not banking elites. To him efficient money was all about active circulation. To
motivate circulation, and prevent hoarding, Gesell propounded that for money to be valid
it should require attachment of a stamp, payable by the holder (be it the citizen or a
banking institution), each week, at the rate of 5% per annum. This system meant that
money "depreciated" by one twentieth each year. This "negative cost" thus ensured that


the holders of money were not is a more powerful position than that of the holders of goods.
Thus he explained that; "as the grain merchant suffered time loss due to wastage, so too
should the holder of money suffer loss through natural depreciation".

We all know that money, in addition to being a medium of exchange, should also be
a store of value. Gesell pointed out that at any point the holder of the free money could opt
to buy gold or silver. However, this commodity holder he argued, would soon find out this
"store" of wealth is not really a store at all. The owner would have to pay to insure and
guard his gold and silver. Thus he brilliantly argued that even the classical "store of
wealth" concept of money had a time wastage cost element. In one fell swoop Gesell had cut
through the "store of value" fallacy of money. Namely he outlined that the only true store
of value in money was "potential reciprocity of exchange" and this reciprocity was
contingent on an efficiently functioning market system within a stable society. The
"system" was not the money; the system was the functioning exchange. This was the truth
then. This is the truth now. However, this truth regarding money has been blinded from
the general public. The money power has conditioned the academic fraternity into
accepting an "interest" paradigm of money which places the holders and owners of money
at a distinct advantage over those who work to provide true value. Thus capital (the
earning of interest) has supplanted labour in modern exchange relationships.
Gesell powerfully articulated all through his life that once this "essence of money
value", i.e. reciprocity of value in exchange was compromised society, which was built on
such exchange, would begin to fail. This failure he believed was at the core of the financial
crisis of 1929. It is my contention that it is also central to the economic collapse that we are
experiencing in 2012.

Only when the lessons and insights of economic pioneers like Silvio Gesell, E. C.
Riegel and Clifford Douglas are fully comprehended and acted upon will our current
money crisis be well and truly solved. Until then the true cause of our problem will never
be successfully comprehended. Without such comprehension all solutions will only be
temporary, ill conceived and doomed to failure.

Money is to society as a ticket is to a rail network. The issue is not to own all the
tickets and live on the speculation of their value but to have a fully operating rail system
available for the use of society, be it citizens or businesses therein. It was Gesell's view that
if banking corporations and institutions were corrupting money, to the detriment of the
greater society, then it was the moral duty of good government to legally and
administratively modify the operation of money to so prevent this state of affairs
continuing in perpetuity. He believed that if such action was not taken society itself would
continue to fail.

Today we are at this juncture. Our options are simple. Do we rectify money or
wreck society? It is time to make money natural again.


Natural Money Examples:


1. The Austrian town of Worgl.
On July 5th 1932, in the middle of the Great Depression, the Austrian town of Wrgl
introduced a complementary currency. Wrgl was in trouble and was prepared to try
anything. Of its population of 4,500, a total of 1,500 people were without a job and 200
families were penniless. The mayor Michael Unterguggenberger had a long list of projects
he wanted to accomplish, but there was hardly any money to carry them out. These
projects included paving roads, streetlights, extending water distribution across the whole
town, and planting trees along the streets.

Rather than spending the 40,000 Austrian schillings in the towns coffers to start these
projects off, he deposited them in a local savings bank as a guarantee to back the issue of a
type of complimentary currency known as stamp scrip. The Wrgl currency required a
monthly stamp to be stuck on all the circulating notes for them to remain valid, amounting
1% of the each notes value. The money raised was used to run a soup kitchen that fed 220
families.

Because nobody wanted to pay the holding tax, everyone receiving the notes would spend
them as fast as possible. The 40,000 schilling deposit allowed anyone to exchange scrip for
98 per cent of its value in schillings but this offer was rarely taken up. Of all the business in
town, only the railway station and the post office refused to accept the local money. Over
the 13-month period the project ran, the council not only carried out all the intended works
projects, but also built new houses, a reservoir, a ski jump and a bridge.

The key to its success was the fast circulation of scrip within the local economy, 14 times
higher than the Schilling. This in turn increased trade, creating extra employment. At the
time of the project, unemployment in Wrgl dropped while it rose in the rest of Austria. Six
neighboring villages copied the system successfully. The French Prime Minister, Eduoard
Dalladier, made a special visit to see the 'miracle of Wrgl'. In January 1933, the project
was replicated in the neighboring city of Kirchbuhl, and in June 1933, Unterguggenburger
addressed a meeting with representatives from 170 different towns and villages. Two
hundred Austrian townships were interested in adopting the idea. At this point the central
bank panicked and decided to assert its monopoly rights by banning complementary
currencies.

2. The United States.
In the United States Irving Fisher analyzed the Wrgl case and published various articles
about its success. More than 400 cities and thousands of communities all over the US
started to issue a form of emergency currency, many of which were stamp scrip. There was
a movement to issue a stamp scrip emergency currency nationwide. Senator Bankhead
from Alabama presented a bill to the Senate on February 18, 1933 and Representative
Petenhill from Indiana presented a bill to the House of Representatives on February 22,
1933.

The stamp scrips in the United States often had a high tax rate, sometimes 1 to 2% per
week instead of 1% per month like in Wrgl. This undermined the confidence in the stamp
scrip currencies. Irving Fisher approached the Undersecretary of the Treasury, Dean


Acheson, to obtain support from the Executive branch for emergency scrip. Acheson asked
the opinion of one of his Harvard professors, who advised him that the system would work
but that it would imply strongly decentralized decision making, which he should check out
with the President. President Roosevelt prohibited any use of emergency currency.


3. Lignires-en-Berry.
In 1956 a few people in Lignires-en-Berry started a revolutionary experiment. They issued
vouchers of 100 French francs for 95 French francs. After one month the vouchers could be
returned for 98 French francs. A notary saw to it that for each voucher 98 French francs
were deposited into a bank account. If the vouchers were not returned, a stamp of 1 franc
had to be bought to keep the voucher valid.

Many people took the money because there was three francs of profit to be made by buying
vouchers for 95 French francs and returning them for 98 French francs a month later. By
spending the vouchers for 100 Francs it was even possible to make a profit of five francs.
People tried to spend the vouchers in the shops and the shopkeepers liked the currency
because it brought them many additional customers, while it never did cost them more
than 2% because the vouchers could be returned for 98 French francs. The shopkeepers
also preferred to use the vouchers for the payment.

Most people did not return the vouchers but bought the stamps to keep them valid. From
the income of the stamps the cost of buying returned vouchers for 98 French francs could
be covered. It did not take long before the currency of Lignires-en-Berry had replaced the
French francs. The vouchers spread quickly and the French authorities became alarmed.
The vouchers became prohibited.

References:
Silvio Gesell, 1929.
"The Natural Economic Order"

E.C. Riegel
"Flight from Inflation"

E. C. Riegel
"A New Approach to Freedom"

Bart Klein Lkink/Natural Money