Habituated as man has been in using political monies he has forgotten that money had its beginning in private enterprise—where the motive was merely the facilitating of exchange. It fell into the hands of government where it came under the motive of tax deception and public exploitation. It must be rededicated to its primary and natural purpose and to that end must be mastered.

How many wars could have been precluded, how much poverty and misery averted, how much further human progress would have gone had money never become a political instrument, we can only conjecture. However that may be, the blame for the detour cannot be laid upon the politician; since it appears that it was the business men who—when they found that the goldsmiths and silversmiths were cheating—petitioned the state to certify to the weight and fineness of coins. Ironically, they fell into the hands of a greater cheat—because the state made clipping of coins a major racket and developed short-changing into a fine art through repudiation and inflation.

The stream of political monies from the beginning to the present day runs deep and dirty, yet to suggest that money can spring from any other source is to surprise if not even to dismay. So has tradition dulled mens' senses. No matter how often the state fails to supply a virtuous money system, men rush back to it in desperation and beg it to try again. Indeed, until we learn that the money power resides in us, we must abjectly beg the state to give us an exploitative system because we cannot return to a moneyless civilization. Yet, no matter how often and earnestly the state tries to provide a true money system, it must fail because of an inherent antipathy between the money issuing power and the taxing power. A money issuer must be a seller who bids for money, not a taxer who requisitions it in whole or in part, as politically expedient and without a quid pro quid.

The early experience of traders with private money was naturally evolutionary. They were being led step by step, toward an unexplored path, toward a goal they could not envision. They only knew that simple barter was inconvenient and that the more it was escaped, the greater was progress and the development of wealth. They were fleeing from an impediment rather than pursuing an ideal for they were unable to conceive the money ideal.

Their first expedient to escape simple barter was to hit upon some common commodity that would be acceptable to most any trader and which would not deteriorate in storage. A number of such commodities were used, but it was natural that ultimately gold and silver would be selected as the best suited for the purpose. They were the most portable, because much value was represented by small weight, and they were not subject to erosion.

What had thus been accomplished was the adoption of a representative commodity, designated by weight or measure, to mediate the exchange of other commodities. Though a mediating commodity is not, and cannot be, money, it is interesting to note how the spirit of money crept in at this point, quite unawares. Let us consider the one mediating commodity, gold. There probably has never been a time in all history when the value of existing gold was more than one millionth of all values passing in exchange during one year. Therefore, it could mediate only an infinitesimal part of all values moving in exchange. Exchange acquired, as it had to, something additional to meet its expanding needs. This additional element was the spirit of money that attached itself under the urge for greater freedom and larger volume of exchange. Because the spirit of money has never been comprehended, the fetish of gold or materiality, as exchange media, in some form remains.

The spirit or purpose of money is to convert barter from a completed transaction into two halves—with one trader, (the buyer) receiving full satisfaction in value and the other (the seller) receiving the assurance of an equivalent value later from some trader. Thus simple barter, which is a bilateral transaction wherein both traders receive immediate satisfaction, gives way to money exchange, which is a unilateral transaction. A time lag intervenes before the seller receives satisfaction but he has the great advantage of choosing what he wants and from whom. To serve the urge for an escape from bilateral barter to unilateral barter was and is the function of money; and in its incipiency it operated unseen and unsung. It had to come, and did come, and is here; but it is still shrouded in superstition.

Trading continued on a bilateral or whole barter basis, oblivious of the money concept by traders. But money crept in and fulfilled its function of expanding exchange. After the practice of using silver and gold as barter media in terms of weight had become firmly established, the practice of depositing these metals for safe-keeping was developed. Thus metalsmiths, who received these deposits, issued warehouse receipts therefor. Then it was found that, instead of taking out and putting in the metal, the receipts themselves could be transferred. This was the beginning of paper money but only to the extent that the smiths by their cunning developed it.

They found that a certain percentage of metal remained in their possession continuously, and that it was safe to issue receipts or promises to deliver metal against non-existent metal—which receipts circulated as money. This was the birth of the banking business. Thus some receipts (those backed by actual gold) were bi-lateral barter instruments and those not actually backed were uni-lateral barter instruments or money, though traders were quite unconscious of using money. The smiths had created money by trickery and thus expanded exchange to the benefit of everybody.

For specie payments (i.e. actual delivery of metal) it was found that weighing and testing was inconvenient, so the smiths developed the practice of stamping the metal in certain weights and fineness. This was the birth of coinage and it permitted another trick by which money again entered exchange unrecognized by traders. The coins were either falsified by the smiths or "sweated" or "clipped" by others to contain less value and thus exchange was still further expanded through the surreptitious introduction of money.

Next came the bill of exchange invented by merchants to minimize the transportation of metal and this gave money another opportunity to break the straitjacket of bilateral barter. Basically, these bills of exchange were orders for silver or gold in favor of a merchant in another city, drawn against another merchant in the same city. But they tended also to circulate and thus permit the issuer to issue beyond actual power of specie redemption.

These examples illustrate how exchange was mediated in part by bilateral instruments (genuine certificates of deposit of actual values) and in part by unilateral instruments—money (based Solely upon common acceptance without reserve for redemption). True, the latter were products of cupidity and were executed by dishonest men but since men were unable to conceive money, there was no other way by which it could emerge and serve its grand purpose of expanding exchange.

By illusion and delusion, money had to break down the barriers of a bilateral exchange system and convert it into unilateral exchange, so that trade could be expanded. In doing so it followed a natural urge, because traders did not really want metal; they wanted exchange power—the power to acquire all commodities; not just one commodity.

It is interesting to note that the spirit of money, which is the spirit of facile exchange, brooded over barter exchange when it was trying to break its bilateral cocoon and emerge as unilateral exchange; and today the ghost of dead bilateral barter still hovers in the minds of some men, in that they try to restore the butterfly to its bilateral shell. They speak sneeringly of "fiat money," not realizing that money can exist only by the fiat of the issuer and that a money instrument is money only in so far as it has no intrinsic value.

So, unable to visualize money as an accounting concept, they cling to the fetish of gold, ever trying by various devices to stretch it to reach the heights of soaring money. These devices range from raising the so-called value of gold to fractionalizing the reserve and finally resorting to debt pyramids that have the most nebulous relation to the magical lodestones presumed to be buried underneath it—a lodestone to which, in actual practice, the man in the street gives not the slightest thought. While he does not understand money, he does not misunderstand it as the so-called authorities do.

While money long since has functioned as a representative of value in all commodities, the superstition still exists that it represents the value of but one commodity, gold or silver and at a fixed price. The absurdity of the standard of value superstition is instantly seen when one realizes that the so-called "value" of the standard commodity is an arbitrary price set by the power of the money unit which is supposed to be supported by that which it supports. The tail is made to wag the dog. Thus, the commodity chosen as the "standard" does not back the money unit; the money unit backs the "standard" commodity. If the money unit were not a power in and of itself, it of course could not raise the price of gold or anything else. The thermometer does not control the weather.

It is evangelical to denounce those dishonest souls who have led us by illusion and delusion into the use of money as a valueless accounting device while we were still clinging to a material concept, but it is not realistic to do so. Without their cunning (in the absence of money mastery) we could not have advanced. This is not to say that such practices should be encouraged; but rather that we should become so intelligent that they are no longer necessary. They involve a parasitism which should be dispensed with—but, in the absence of an intelligent approach to the subject, it is better that we be deluded into exchange, even though it supports parasites and exploiters, because exchange is the neck of the bottle in the productive consumptive cycle, and is therefore the final determinant of human progress. Exchange must be expanded by fair means or foul; for society cannot stand still, and can progress only by expanding exchange.

There was no comprehension of money while it was still a private enterprise medium, but there is reason to believe that tradesmen would have found their way before this, because they were at least actuated by the right motive, namely, the pursuit of a means of facilitating exchange, which is money's sole purpose. When, however, money experimentation fell into the realm of politics the motive changed to suit the purposes of those who used the state for private advantage and thus, for hundreds of years, money has followed the political tangent that leads only to frustration. When, by assuming the control of money, the state intervened in private enterprise, the latter became and remains the political enterprise system and can never be truly private and fully serve society until the money power is recovered from the state and operated as part of the private enterprise system. But before this can come we must master the money concept.


Ten years ago, after fruitless search for a money master, we read the public statement of a well known monetary economist that there were only "a few persons in the world who understand the meaning of money." We asked who they were and received the names of 13 Americans and 5 Europeans. Of these international authorities we succeeded in getting the consent of 6 Americans and 2 Europeans to enter a symposium to be presented to Congress which was at that time debating money theories. We submitted the result to the Senate Committee on Banking and Currency and, on June 9, 1934, wrote a covering letter to that body from which the following are the concluding paragraphs:

"The total of 176 answers to the 22 questions showed such contradictions, inconsistencies and disagreements that we feel it a patriotic duty to state that there appears to be no understanding of the subject of money either among contributing authorities or among others whose writings we have studied. No clear principles are established; projected theories are not demonstrable; the basic concept for the construction of a monetary science seems lacking.

"The meaning of money is yet to be revealed, its mastery is yet to be proven, the power of laws to direct or control it is yet to be demonstrated, the medium to implement it is yet to be developed. The people should no longer be misled by abracadabra and psuedo-profundity. There must be a break with the past. New thought must challenge the prevailing hypothesis."

The same year there appeared a book by Montgomery Butchard, an English author, entitled "Money" which the author describes as "Selected Passages Presenting the Concepts of Money In The English Tradition, 1640 to 1935." Approximately 200 named and anonymous authorities are quoted. Reviewing them, the author concludes with these words :

"What does this book 'prove'? In any narrow or positive sense it proves, I hope nothing. But if the passages illustrate anything it is the broad and negative thesis that in the history of English writings on the nature and function of money there has been from the earliest times to the present no observable advance."

With this conclusion we fully agree. The following year, the same author turned from the orthodox authorities and examined the so-called new thought on money. His book is titled: "Tomorrows Money By Seven of Today's Leading Monetary Heretics." They are, Silvio Gesell, Arthur Kitson, Frederick Soddy, R. McNair Wilson, C. H. Douglas, G. D. H. Cole and Jeffrey Mark. This is the author's concluding comment:

"The seven theories agree, by direct assertion or by inference, that measures of monetary reform will at least initiate the remedying of our economic and social ills, and that these monetary measures should include at least:

1. Public (communal, national) control of money and monetary policy.

2. Public control, direct or indirect, of prices."

Thus the so-called heretics still wear the mantel of orthodoxy —because the two measures stated are cardinal to all money theories heretofore extant, and both are false. America too has many sincere would-be money reformers, and some accused of heresy, but all, so far as we know, accept the false premise that government must issue, control and manage money and prices. Thus their efforts are innocently devoted to various schemes to improve upon perversion. Government should not issue or control money; and it is not the function of money to control prices. Money is a neutral agent whose sole function is facilitating exchange, and not influencing prices in any way. Our English contemporary must look to America for heretics, and, we believe, will find them only in the Valun school of thought.

Americans think in the English tradition, which is no better and no worse than any other, for they are all alike in fundamentals. There has been, until now, no independent American approach to the problem of money. By strange coincidence, in the very year that Americans declared their political independence of England, an Englishman, Adam Smith, put them under a mental subjection that still holds sway though it is utterly inconsistent with our Declaration of Independence and our political principles. The father of Political Economy states its purposes in "The Wealth of Nations," thus:

"Considered as a branch of the science of the statesman or legislator, Political Economy proposes two distinct objects. First, to supply a plentiful subsistence for the people, or more properly to enable them to provide such a revenue or subsistance for themselves; secondly, to supply the state or commonwealth with revenues sufficient for the public services. It proposes to enrich both the people and the sovereign."

Here is written, and by our schools accepted, the bald paternalistic and autocratic principle which we denounce in all our political declarations and which must be renounced if man is to attain his true dignity and freedom. Yet it dominates our practices more and more as we flounder in our perplexities. We divide only on the degree of paternalism and government management of our lives that such a philosophy provides, not on the principle. By this theory the government and the people are set up as separate entities; with the government as a sovereign patron of the people. How can the government (which, under the American political philosophy, is nothing but a creature and dependent of the constituency) "supply a plentiful subsistence for the people" or how, except by leaving them alone and not burdening them with taxes, can it "enable the people to provide such a revenue or subsistance for themselves"? How can man be a dependent of the state? Does the citizen tax the state? Is not the state merely a corporation created by man to render services at a price and must not that price be paid by the citizen to the state? And is not the ability to pay such price, for such service, conditioned upon the citizen's free and untrammeled power to carry on his production and exchange enterprises? If we fall under the delusion that economic betterment can be gained by means of a power inherent in the state are we not unwittingly on the path to communism and complete frustration? Is not the doctrine of Carl Marx but a logical extension of the theory of Adam Smith? How can we accept one and quarrel with the other? Once we accept the principle of paternalism, how can we defend the principle of the sovereignty of man? From these false theories that we have borrowed from the old world has sprung the idea of managing the people by money and we have accomplished nothing but perversion and gross miscarriage of our wealth producing capacities, and nullification of the inventive genius of our scientists that might have carried us much further had we a money science capable of distributing what they have shown we are able to produce. It is the state that must be controlled by the citizen through his money power; not the reverse. We have tried the impossible experiment of combining in the state a political democracy with an economic autocracy; the principles of Jefferson and the principles of Adam Smith. Political democracy cannot work without economic democracy; and the money power is the franchise of the latter.

If America is to vindicate her leadership of political theory she must also provide leadership of economic theory; and the two must be in harmony. Such dual leadership means casting traditional economic theories to the winds, just as was done with traditional political theories.


Political economy is a fiction. Economy can have but one sphere, namely, in the practice of the individual. Political economy implies that the state can have a separate existance as a creative force, whereas, it is but one of the instruments of the individual's economy. All wealth—all economic planning—can spring only from the individual for his private guidance, and in him resides both the political and economic power. The ballot is his instrument of political power; money his instrument of economic power and the former is futile without the latter. He is a dupe who believes that government can be both his servant and his patron, i.e., that the state can develop an economy to enrich him. He must govern government as he governs himself; and he must provide for government as he provides for himself. Any power existing outside himself is only that which has been delegated by him, or has escaped from him; for he is the one and only power-house. He cannot delegate his money power, if he would, because it is inseparably linked to his buying wherein he must exert his private discretion. To issue money, one must buy, to buy, one must appraise. Hence, the money issuing power is undelegatable and unusurpable.

Assertions such as these can be reconciled with the American political theory of democracy; the old-world political and economic philosophy of divine right and descending blessings, cannot thus be reconciled. We are doomed to failure in our political experiment unless we declare our monetary control of both the state and our private affairs and this can be done only by the separation of money and state. Man's natural money power cannot be vicariously exercised in his behalf; he must either exert it or suffer the exertion of a money power adverse to his interests. The only freedom we have retained against the encroachments of the state is the freedom to struggle against perversity. If we use that freedom intelligently we will overthrow the political money power and attain money freedom, the guarantor of complete economic and political mastery. It is utter folly for us to imagine that we have freedom when the very life blood of our private enterprise is controlled by government and our political power thus nullified.

Money, like everything else, began in private enterprise. It must be an exclusive instrument of private enterprise untouched by the state which is a public enterprise outside the sphere of competition, securing its income not by the necessity of winning patronage but by tax impositions and therefore not qualified to exert money power. Had the early businessmen realized this, money would not have become a political instrument; and untold miseries, revolutions and wars would have been averted. It is for us now to rescue it, and, to do so, we must lay hold firmly with our minds on the theory before we put our hands to the practice. That is the purpose of these studies.

As we close this chapter on the past let us bury the fetish of value in money. The banker sneers at "fiat money;" the layman sneers at "fountain pen money," thus betraying the universal ignorance of money.

The purpose of money is to obviate the transference of value one way in exchange. It substitutes credit for value, but the credit is social credit, i.e., it rests upon the common creditability of the trading community. The money instrument, however, springs from the fiat of the issuer, a fiat that asserts that the issuer is, under the money pact, qualified to issue. The actual creation of money instruments can take place only by fountain pen—using that term to include all graphic processes. Thus all money that has ever existed or can exist is fountain-pen-fiat money.

Any valuable thing, such as metal in coins, is not money—it is commodity, and to the extent of its value displaces money in the coin. Money is a memorandum, a credit instrument, a bookkeeping device to effect split barter and is money only to the extent that it obviates delivery of value by the transmitter.

Since all money is fountain-pen-fiat money, the only question we have to decide is whether its issuance shall continue to be the special privilege of a few or the right of all. By such decision we determine the fate of humanity.