We come now to the crux of our problem in determining the money issuing power. Through the traditional bank credit practice, which is an outgrowth of the ancient aristocratic attitude, our minds have become habituated to attributing creditability to possession of material resources. We should be careful not to borrow mental attitudes from the autocratic political money system which we are undertaking to renounce.

There is no psychology of grant in our system. Everything is predicated on rights and mutual interest. There is none among us who is endowed with special powers, hence there is none that can favor others. We are pursuing the ideal of a true money system because money exchange is indispensible to all of us. We are interdependent. We are interdependent because we have discovered that we call exploit ourselves fully only through others.

If we make all we consume, we must live a very low standard life. If we make things that others consume and others make what we consume we raise our standard of living. This requires exchange and as we have seen, money is merely a device for facilitating exchange and hence a means of exploiting our own wealth producing capacity. But let us not be confused by the exchange process. It does not, or at least should not, alter the rule that we consume only what we produce and produce all we consume.

Though each of us is but a very small part of the vast mechanism of production and perhaps apply our minds and hands directly to none of the things that we use and consume, yet all we acquire is of our own making. Regrettably, most of us have made even more than we have acquired because our unfair money system has caused others to gain some of our production through the deceptive processes of exchange.

If we make all we consume and consume all we make, does it not follow that each of us is his own customer and that a true exchange system is one that permits us to buy from ourselves everything we produce and nothing more? if I be a shoe maker and desire an automobile, I can make that automobile by making shoes and when I have made an adequate number of shoes, I should come into possession of the automobile. The transformation of the shoes into the automobile is the service that exchange renders to me, and the transformation of the automobile into shoes and other things is the way exchange serves the automobile worker. The function of exchange is to transform our production into the things we want.

If we would be fundamental in our thinking we must conceive it not only the right but the duty of each of us to consume all we produce, or, putting it in exchange terms, we must buy all we sell. If we would sell, we must buy and, therefore, the solution of the problem of selling our services adequately is to buy them adequately, indirectly by buying the services of others. The reciprocating movement is that others buy their own services, indirectly by buying ours. To permit the natural action and reaction of exchange to bring us boundless prosperity and security each of us must be enabled to invoke it through our inherent money issuing power.

All our economic ills are traceable to the folly of believing that our buying power can be vicariously exerted, i.e., that the government and those few who have bank credit can do it for us. They can no more buy for us than they can produce for us. The wealth producing power must be coordinated with the money issuing power and reside in the same places - namely, in everyman.

If exchange plays no tricks on us, all of us are working for ourselves; all of us are buying from ourselves; all of us are selling to ourselves. Now what are we buying and what are we selling? We are all buying and selling the same thing. This is human energy, mental and physical. There are infinite varieties of human energy in physical form but, basically, there is but one commodity in exchange and that is human energy. It is the only value.

LABOR MONEY

Others have comprehended this and from this premise - that all value is labor, and that money is based on value - have reached the conclusion that money must be based on labor, and rightly so. The fatal error, however, that labor money planners have made is that they set a measure of labor, such as an hour, as a unit of value. This destroys the entire function of exchange, which is to evaluate labor. When exchange is not free to evaluate, it is impeded, and when exchange is impeded, production is retarded.

While it is true that labor, mental and physical, is the only value - and therefore the sole commodity that passes through exchange - it does not follow that labor is uniformly valuable. To state that all value is made up of labor, is not to state that all labor is equally valuable or even that all labor is valuable. Labor may be wasted; it may be so unintelligently applied that it is worthless.

In the many efforts to set up a labor money system, we see how logic based on a sound premise has been frustrated by the old habit of undertaking to establish a fixed unit of value for money. This inability to comprehend the abstract value unit which our system comprehends - has been the undoing of all money planners of the past. In truth, all money systems that have existed, and all that can exist, are labor money systems because there is nothing else upon which a money system can be based, since it is the sole value. But a money system can, and all thus far have, distorted the exchange process of evaluating labor to the prejudice of the many and the advantage of the few.

We are all laborers and therefore fountains of wealth, in that we emit human energy, but we must direct that energy the way our fellow laborers would like it; and in the measure in which we respond to this demand will our energy be valued - and not by the time we have consumed in projecting it, nor by the sweat and toil that we have sacrificed. In turn, our fellow exchange participants must project their energies to our liking. These processes of projecting and evaluating energy are the function of exchange and, after evaluation has been determined, money expresses the evaluation; but money, if it is true, will have no influence whatever in determining the value. Money is not a measure of value; it is a method of stating a value determined by exchange.

The ideal we are striving for, therefore, is to keep money neutral in the exchange process; and to do this we must make it available to anyone who wishes to utilize it within certain bounds. These bounds are not easy to determine.

The principle can, however, be simply stated thus:
Every person or corporation is entitled to create as much money - by buying, as he or it is able to redeem - by selling.

As we have pointed out, each of us is basically his own supplier and his own customer. The exchange process is in fact a shuttle movement. The shuttle goes from us laden with our energy and returns it to us transformed into the energy of others. Or it comes to us first and we return it. The movement is initiated by money power; and whoever lacks money power is unable to start the shuttle. An economy that restricts its shuttle starters, limits its productivity. The power to start the shuttle is really the power to buy from one's self, i.e., the power to create demand for one's own services. A true money system must make this power available to all.

While the power to buy induces demand to sell, it does not follow that this reciprocal invariably reacts on a particular buyer, for he may not have the particular value for which a demand has been created. Therefore, we cannot solve the economic problem by merely providing money power and multiplying shuttle-starters. If the problem were as simple as this, we could establish the money creating power for everyone without limit on the assumption that selling would automatically balance buying in each case. Buying does create demand that reacts on some seller, but not necessarily on the one who created the demand. There is, however, no way of determining in advance whether a particular buyer may create demand for his own wares or services. Since this is so, it is obvious that exchange can operate only on a trial and error basis. The problem we must solve is how large a margin of possible error shall be alloted to each member of the Valun Exchange.

A STARTING POLICY

The best that we can do is to set up a policy subject to amendment as experience may dictate. While there is possibility of error this should not intimidate us, because greater harm can follow from erring on the conservative side. Exchange must not be impeded even though some exchanges fail to realize their ideal. It is better to allot too much money power than too little - because it is impossible for successful exchange operators to willfully abuse this power; while it is possible to starve potentially successful operators.

To illustrate: Suppose a member has a debit power of 10,000 valuns, i.e., has the power to overdraw his account to the extent of 10,000 valuns. Assume that he has drawn down for his buying to the extent of 5,000 valuns when returns began coming in from sales; and these current income credits on his account then equaled or exceeded his current expenditures. It would be impossible for him to create more valuns, because they could be created only by diminishment of his income - since the income would cancel valuns as fast or faster than he could create them. Money income destroys money creating power, as money can spring only from a debit balance. Only the moneyless can create money.

The normal experience of business is that income and outgo keep approximately abreast of each other; and our purpose is merely to provide a margin of discrepancy. In some industries this is larger than others, due to the length of their turnovers. Some industries, particularly the farming industry, must expend for a long period before returns come in. Others - for instance, the retail grocery business - have a lag of only one to two weeks between outgo and income.

A study of the turnover of various industries should be made as a guide for variations from a general rule. As a general rule for the initiating of trading on the Valun Exchange, we propose the following.

Each employer would list with the Exchange the names of employees who are members of the Exchange - together with the amount of salary payable to each over a three months period, including officers and owners. The amounts, so stated, to constitute the debit limit of each such employee.

Each such employee-member to be authorized to write checks up to the limit stated. The amount of the stipulated salary to be credited to the Exchange account of the employee as earned and simultaneously debited to the employer's Exchange payroll account. Checks written by employees to be debited to their accounts. No further payroll process would be necessary. Thus the money creating would begin by employees writing checks for their needs. If employee A had a salary of 100 valuns a month, his debit power would be 300 valuns. In other words, he could overdraw his account up to 300 valuns.

The employer would have two accounts, a payroll account and a commercial account. His payroll account to have a debit limit equal to his total payroll for three months. His commercial account to have a debit limit of 1/2 this amount or as much more as the class of his industry entitles him to as determined by the industry study of turnover.

To include all members in debit power, thus providing for those who are on no payroll, a minimum of, say 100 valuns might be provided for every member.

These debit limits would not be loans, no instruments would be executed for them and the actual debit would be the amount of overdrafts on the account. There would be no term to them; and they might be maintained indefinitely. The reason for this is that they constitute the money supply and are necessary to exchange, and there is no reason for making them rotating. Debit balances on some accounts of course imply credit balances on others.

Therefore it would be impossible for all members to have debit balances at the same time. Some might start their check writing against a credit balance and never have a debit balance and some might remain chronically on the debit side.

Under the above proposal, exchange would begin by consumers purchasing at retail, and by employers purchasing at wholesale. At the end of the initial 3 months period, the employer would find himself with a debit to his payroll account equal to the total earnings of his employees during that period. This would be the limit of the payroll account. For his employees to continue their drafts, he would have to draw on his commercial account - in which would have been deposited all his receipts, and in which he would have a debit power of 1/2 his three months payroll.

EXAMPLES

An example: An employer has 50 employees and their total pay per month is 5,000 valuns or a total of 15,000 valuns over three months. Besides this debit power on his payroll account, he would have 7,500 valuns debit power on his commercial account or a total of 22,500 valuns. Only his employees could draw against the payroll account. At the end of the three months his payroll debit power would be exhausted; and, to continue the power of his employees to draw against his payroll account he would have to transfer to it from his commercial account enough to provide for the next three months. Employees would have a permanent debit power equal to three months salary.

Employers would have a debit power the first three months equivalent to 1 1/2 times the three month's payroll during the first three months, and one third of such sum permanently.

As stated, the proposed debit limits are merely an estimate of what would provide sufficient circulation for a start. Demand for additional debit power would not be a matter of individual request, but rather the determination from the industry study of turnover, which industries required more and how much. The determined amount would be allotted to every member within the particular industry in ratio to his sales for the previous year or six months.

As for employees, the debit limit for each would be automatically adjusted by the wage or salary, with the only question being, whether the three month period is adequate.

Persons who are not on a salary basis, such as the commission salesman, the news dealer on the corner, and others who are neither employer nor employee would come under the minimum debit limit which might be, say, 100 valuns. Professional persons, such as doctors, lawyers, ministers, architects, engineers, etc., like farmers, would be classified under the industry survey with an appropriate debit allotment assigned.

Each member, with his debit limit assigned, could then, within such limit, create fountain-pen money by the mere writing of checks. If any currency be required, he would present his check to the nearest Currency Counter dealer and receive bills and coins as desired. If he should exceed his debit or over-draft limit, his check would be returned just as it now is when he exhausts his credit balance in a bank.

There would be no payroll problem for either employer or employee. The Exchange would automatically credit the prescribed pay to each employee's account each pay day and the employee would enter his pay in his check book. Of course, any check received by any member would have to be mailed by him to the Exchange for credit to his account and debit to the account of the check writer.

Under this plan of employee money creating power, employment is given a stimulus; because each employee brings to his employer his own debit power, and the employer has a three months deferment of wage payments. This is a vital contribution toward the sale of labor services because it makes the payroll less forbidding. Each employee becomes a capitalist who brings not only his services but his own financing. Each employee in effect buys his own services. This puts money power at the most vital point. It also cushions unemployment; because an employee laid off need not stop buying unless he has exhausted his debit limit.

MONEY POWER THE STABILIZER

Once we have established the principle of debit power for employees, we have released a power for stability that is not possible when this power is confined to employers or sellers of goods. How far we may go in this direction can not be forecast but it is plain to be seen that debit power at this point can positively prevent depression because sustained purchasing power means sustained employment demand.

When goods show a tendency to accumulate in warehouses, it indicates that employees have not been paid wages high enough to buy the goods they have produced. Reduced production then ensues; which means reduced employment, and this in turn implies reduced purchasing - thus accentuating the unbalance between goods supply and money supply. Perfect competition should preclude this unbalance between goods supply and money supply because it would compel adequate wages. But can we hope for perfect competition? While the political money system is the greatest disturber of competition, there are other disturbing influences, also attributable to political intervention.

If there be no recourse other than to introduce a compensatory force to balance the inequities of imperfect competition, the valun system will be found ideally suited therefore by reason of the simple measure of continuing debit power even with a discharged employee. This would prevent the depression spiral from forming, and would nip a threatened depression in the bud.

A depression means shortage of employers and surplus of employees; but is it not made less menacing when money creating power resides on the employee side of the employment line? Would it not induce some employees to step across the line and become employers (since employment does not mean an immediate drain upon available funds) thus tending to restore the balance between employers and employees?

The aim of the valun system is to establish a true money system, and to rely on competition to keep the economy on a steady keel. It is not inspired by the aim to establish a compensatory system for inequalities that may exist in exchange; but we point out that, if a compensatory program must be pursued, the valun system supplies the need effectively.

CONSTANT DEMAND

Since constant employment, with resultant constant production and constant consumption, is the ideal of an economy, may we not resolve to make it actually so by regarding the employer-employee relationship as existing between the whole body of employers and the whole body of employees rather than between individual employers and individual employees?

If we take this attitude it is simple to provide - in the Valun Exchange - a central employment bureau where employee-members are registered with full information of their qualifications. Should any be laid off, they could continue to draw on their account to the extent of 1/2 or 3/4 of their recent salary until some other employer or their former employer reengaged them.

This policy can be justified on the ground that there would be no disemployment unless employees had been underpaid - thus making it impossible for them to buy the goods they had produced - and the disemployment compensation is to correct this previous inequality.

During the disemployment period consumption would be continued while production would be retarded, thus tending to restore the balance between production and consumption. The employee in effect would buy himself back into employment; because his consumption would induce demand for production, just as his previously stinted consumption had brought about his disemployment.

Would this issuance of new money during non-employment be inflation? No, it would not. Inflation is the issuance of money against a non-value. Here we have the issuance of money against values previously produced and priced abnormally high, so high in fact, that there was not sufficient money supply in the hands of employees to purchase them. In other words, the condition of unemployment was produced by an inflation of goods supply - causing prices to decline - and the action proposed is a deflationary influence upon goods, causing prices to return to their norm.

If, however, we must choose between a higher price level, with continuing employment, and a lowered price level with unemployment, the choice would be unanimously for the former.

We can resolve the membership of the valun system into a community within the general community - an inner community where the evils of the political money system are barred; and where other evils, that may be inescapable, are compensated for, and the economy thus kept on an even keel.

It is not the purpose of this study to outline arbitrarily a debit policy. Debit policy is the vitals of the whole system and if the principle of the democracy of the money power is respected, all else is a matter of judgment and preference as willed by the members through their elected servants.

It is possible not only to assure continuity of prosperity of all employed members of the Exchange, but also to even absorb gradually the unemployed from among the non-members. The cycle of production and consumption need not begin with production; it can begin with consumption. An unemployed person may actually buy himself into a job by consuming existing goods, thus inducing demand for labor. Since a person having valun debit power can spend his valuns only with suppliers who are members of the Valun Exchange, his demand can be directed only within the system; and thus all reaction remains within the valun community.

We shall not have fully comprehended human rights until we recognize the right of every man to proffer his services to society by the practical means of requisitioning the services of others through his power to issue money. In an exchange society man's only means of employing himself is to employ others and thus induce the reaction of demand for his own services. In sheer justice, therefore, we cannot deny to any man the right to issue a draft upon his own energy, even though, at the time of such issue, he is unemployed.

FEARS UNJUSTIFIED

The fear of moral delinquency, as a hazard to debit power exerted by individuals without discrimination, can be dismissed because of the unity of the accounting system. A Valun Exchange would be a St. Peter's ledger on earth which could condemn a faithless man to economic perdition. Under the political money system, every bank is an individual issuer of credit and there is no central ledger; and one may default repeatedly and still remain in the economic community. Not so in the valun system. There is only one ledger of debits and credits. Nothing is expected of any one who issues valuns through his debit power other than that he will accept valuns when tendered for goods or services at the current market price. If he fails in this, it will soon show up on his account. If he has been willing to deliver his wares or work at competitive prices and has found no takers, the fault is not moral. If he wilfully refuses to accept employment or patronage, he automatically brings upon himself ostracism from the entire valun community. This self-imposed injury is much greater than any harm to the remaining reputable membership - which will go on functioning without noticing his departure.

There will be honest failures - since men will continue to be fallible - and the system should provide some way of reestablishing the debit power of such persons; but this is one of the matters that may be left to the common sense of the members to decide.

The question as to what becomes of unsatisfied debits that result from failures, is not one that is peculiar to the valun system. Losses in business are absorbed in the price of goods and this is one of the influences that tend to raise prices. There are, however, other influences that tend to reduce prices - notably the loss of currency, which in turn is countered by the presence of counterfeits. These factors are not serious and may for the purposes of this study be ignored.

We may assume that every issuer of valuns will redeem with goods or services all the valuns he issues; and the failure, for whatever reason, to do so can not be as harmful to the economy as is a pessimistic policy which would hamper exchange. It is far better that money be issued beyond its actual redemption than that it be issued below its possible redemption - since the latter course hampers exchange, and this in turn retards the production of wealth. Idle man hours are a more serious loss than unredeemed money and the former must never be hazarded by pinching the latter. Interrupted production is the only loss that is a net loss.