From Markets to Market-Amoebas, and Back

December 23rd, 2011
in Op Ed

By Guest Author Roger Erickson

While exploring how and why we have market meltdowns, it's natural to ask  whether any economic ideology comes close to mapping to the vast literature about known, biological model market systems, i.e. species and ecosystems.  Looking for consistent parallels is of paramount utility to investors able to swing between hyper-local and systemic views in the endless pursuit of adequately managing both known, immediate risks and long-term uncertainties.  My conclusion, up front, is that investors need to invest as much or more time & resources in upgrading operations at the SEC, US Treasury, Federal Reserve and US Congress as they do in choosing winning stocks.  Market platforms, like all other systems, must be created and maintained, and the highest cost in all systems is eventually the cost of maintenance, alternately known as the cost of coordination.

Follow up:

To broaden perspectives, let's start comparing examples, by looking at a particular biology model, the social amoeba Dictyostelium discoideum. It's an easy choice, since "dicty" carries so very many parallels to human market systems.  From there we'll proceed to the only economic paradigm that I've found to be anything remotely resembling biology - the operational, non-theoretical observations erroneously called MMT (modern monetary theory).  Comparing diverse market models provides quick, powerful methods for seeking logical consistency and spotting inconstancies.  There are far too many useful parallels to mention in one column, but dicty will be introduced as a fantastically useful model which fiscal policy staff should consistently review.

Let's build the argument for analogous contexts, starting with one, useful comparison useful for reducing confusion over the nature of currency, and of currency creation.  The USA is a social collection of over 300 million agents now.  In comparison, every amoeba is a collection of well over 300 million molecules.  Usefully, each sovereign market, a human nation and a single-cell amoeba, utilizes a sovereign currency system to denominate transactions and translate value between unpredictably distributed transaction chains.  Notably, dicty goes even further, and scales up it's cells at will into multi-cellular aggregates, remarkably analogous - if not in scale - to the many steps in evolution between amoebas and humans, and their respective markets.  It's like Libertarians periodically choosing to practice Congregationism!  We'll leave most of those analogies for later review.

What PRIMARY internal currency system do amoebas, and all known cells use?  A molecule called adenosine.  Adenosine can be loaded with energy value by attaching one, two or three phosphate bonds, making adenosine mono-, di- or tri-phosphate, respectively AMP, ADP or ATP.

The question most orthodox economists would ask is, "how much adenosine does every cell make?"  The answer is, "as much as it needs."  What's the mystery?

Does any cell "borrow" adenosine?  What a silly question.  No system borrows its internal bookkeeping methodology.

What entity in cells manages adenosine production?  There are multiple synthesis & degradation paths all capable of recycling adenosine, and they are all kept in dynamic equilibrium by universal feedback.  The self-reporting system becomes it's own Federal Reserve.

Can a cell ever "run out of" it's adenosine bookkeeping currency?  Don't be ridiculous.  As a bookkeeping "issuer", cells are tasked with managing real-goods budgets.  Short of absolute death or damage, cells can always synthesize as much adenosine bookkeeping currency as is needed in order to translate bookkeeping requirements between transactions waiting to happen.  Bookkeeping in any organized system is infinitely self-generating.  It is an incidental byproduct of the system itself.

Another odd question that orthodox economists ask is "how do cells manage the thorny issue of 'price stability'?"  What?  The question has no logical base in either context.  The cell or nation must survive, by maintaining all needed components.  No secondary framework for determining price stability has any relevance.  The actual value of any given transaction has no consistent frame of reference other than survival of both needed components PLUS the aggregate.  Local measures of value relevant to that framework are ephemeral, change every picosecond or faster, and are constantly re-established so randomly that there is no aggregate purpose in tracking them other than in assuring "adequate" co-maintenance of components & aggregate.  Endless details not worth tracking get buried in that term, "adequate."

Now you can see why a biologist first addressing economics would ask, "in human economics, what is the equivalent of the adenosine molecule"?  That's looking for consistency across contexts, where one  context obviously grew from & must be consistent with, the other.

The human social equivalent of the adenosine molecule? Surprisingly, there is no consensus on that definition, and the history of human market bookkeeping systems is comically convoluted, understood by few, yet vociferously argued over by many.  That's to be expected in still-emerging systems.  What's especially comical is the certainty of so many people in claiming permanent definitions for an obviously still-forming operational system. Personally, I'm leaning towards person<->person and person<->group bonds termed affinity, trust & credit to be the more universal human equivalent to adenosine, while our formal "currency" bookkeeping system is  selectively used for only some transactions which actually require calculable precision.

As a graphical reminder, compare two lists yourself, Ben Franklin style.  On one side, make a list of things you can put a $US price on.  On the other side, make a list we're not [normally] comfortable putting a price on.  Starting at the beginning, does a human egg cell put an exact price on union with a human sperm? [Okay, let's chalk that one up to statistical variance.]  Does a mother expect cash payment from the embryo growing in her uterus?  Do mom's keep an accounting record accurately charging for breast milk?  Do fathers or moms charge by the hour for diaper changes, counseling, consoling, bandaids, encouragement & training?  Do [sane] partners put a price on affinity bonds & vows?  Carry on through neighbor potlucks, churches, and any other examples, on up to willingly giving one life to preserve others, and refusing [except by banksters] to put a price on the lives of your co-patriots.  It would be interesting to see an attempted tally of the statistical proportions, nationwide, of the American value system that can & can't be financially quantified.

Without consistent axioms defining all components, it is very difficult to make a self-consistent system capable of smoothly scaling up markets to any size. A lowly "market-amoeba" such as dictyostelium can routinely scale up from small to large size.  It can aggregate and dis-aggregate "international" markets, and emigrate and colonize - all without EVER having a "depression" caused by currency mismanagement.

In contrast, what are we struggling with?  It's clear that emerging human aggregates, our nations, constantly confuse affinity, credit, currency, patriotism and other measures, to our detriment.  Loss of operational coherence is always the most costly result of maintenance mistakes.  Upon review, many of our self-imposed difficulties stem directly from confusion due to scale.  We're generating such large numbers of people, and so many transactions, at such accelerating rates, that we inevitably end up trying to attach exact currency bookkeeping to practices, interactions and products that others are not sure we should try to attach a formal price to!  And we have less time to think through every decision we make.  That is exactly why Walter Shewhart coined his famous phrase.  "In any complex system, the highest cost, by far, is the cost of coordination."  While Walter was thinking mostly of industrial systems, he did, in retirement, realize the implications of his insight.  Today, a corollary should be obvious to all.   The return-on-coordination is always the highest return.  Furthermore, loss of operational coherence is the greatest danger for a complex aggregate.  Ironically, return on market coherence, across mixtures involving non-precise & precise transaction bookkeeping, is something we can't put an accurate price on!  Nevertheless, a simple answer is clear, across molecular, cellular and human markets.  As long as we scale aggregate coherence, our aggregate options will continue to scale infinitely.  So why do we sweat those local gains & losses that are negligible in comparison?  Lack of coherent perspective, obviously.

To simplify things, let's carry on anyway, and begin to parse just the formal currency operations in human markets - recognizing that that approach alone is inadequate for managing national operations. Let's start by digging through the history of currency, to arrive at MMT, which is not a theory at all, but rather just a description of how a SUBSET of human bookkeeping - which we call monetary operations - is actually managed in current market systems.  It is the only economic data base I've come across that, like molecules & adenosine in cells, deals only with operational facts, and can scale up smoothly to handle any contingency, on demand.  In short, it is geared to the scalable operations of aggregates, not encumbered by the non-scalable,  uniquely local perspectives of diverse components, nor the limiting ideology of any market or sub-aggregate.  To a biologist, that sounds promising, and it sounds like a tool that an aggregate can successfully work with, and on.

There are useful reviews of early decisions on currency matters mentioned in the Constitutional Proceedings of 1776, see Public initiative and the beginning of US currency - How a confused electorate can end up pretending to borrow it's own currency, instead of creating it, and "Understanding Modern Money.  Such links make it clear that currencies, as a "tally method" are initially created, on demand, by aggregate entities, whether nation states or market-amoebas - but ONLY for specific types of transactions, where precision is thought to be required.  So far, so good.

However, what happened next?  Why so much historical confusion over currency creation and management of currency supply?   A biologist would simply conclude that we have an incompletely formed aggregate, not coordinated to the degree required to ensure coherent actions and guarantee national survival.  In short, we simply aren't thinking this through clearly enough.  It's not rocket science, and actually doesn't need to be precise.

When an emerging aggregate is incompletely organized, some mass confusion remains and the bulk of relevant feedback is not yet adequately parsed.  The result is that key aggregate options go unexplored.  That certainly seems to be the case when reviewing current monetary policy.  See Robert Eisner, The Misunderstood Economy, p.90;

Almost everybody talks about budget deficits. Almost everybody seems in principle to be against them. And almost no one, literally, knows what [they are] talking about.

Given this degree of ideological confusion, it is not surprising that so many residents, even financial professionals, know so little about our fiscal history, and possess even less systemic perspective from outside their narrow profession.  Here are just a few essays on the many fiscal and financial misbeliefs blatantly muddying our current financial outlooks:

    Teaching the Fallacy of Composition: The Federal Budget Deficit.

    Taxes for revenue are obsolete.

    Fiscal sustainability 101.

One of my favorite exchanges on fiscal policy occurred in 1941, after we'd had to jettison the cumbersome gold-std in order to gain the focused speed, flexibility & aggregate coherence needed to successfully wage WWII, an example of a nation acting like a market-amoeba.

ECCLES: We [the Federal Reserve] created it.

PATMAN: Out of what?

ECCLES: Out of the right to issue credit money.

PATMAN: And there is nothing behind it, is there, except our government's credit?

ECCLES: That is what our money system is.
- Federal Reserve Board Governor Marriner Eccles in testimony before the House Committee on Banking and Currency in 1941, during questioning by Congressman Wright Patman about how the Fed got the money to purchase two billion dollars of government bonds in 1933.


For more on Marriner Eccles, see:

Marriner S. Eccles and the Federal Reserve Policy, 1934-1951



This exchange drives home points that make consistent sense to a biologist.  First, any sovereign currency system is, by definition, always tied to a "public initiative" standard, and nothing else. Second, there is a distinct, operational difference between the real-budget metrics used by the bookkeeping issuer and the proxy-budget metrics employed by the users of that bookkeeping currency.  Government credit = a population crediting the group with the right to create as much bookkeeping as needed, no more and no less. Third, momentary tactics are not written in stone. Only our enduring national goals and policies are steadfast principles.  If we can direct our Central Bank to arbitrarily create the currency to "buy" bonds, in order to quickly force innovation through outdated methodology, then it's also immediately obvious that we don't even need to "buy" the bonds, and may bypass them as well.   If Treasury-bonds were irrelevant & obsolete in 1941, then there is no reason for US citizens to be limiting their ability to think creatively in 2011!

Warren Mosler, seemingly the reincarnation of Marriner Eccles, has a simplified essay driving home many of the diverse inconsistencies in how most people - even banking and economic policy exerts - view monetary operations: The 7 Deadly, Innocent Frauds of Economic Policy.

In summary, will our national market system eventually have to act more like a self-consistent market-amoeba?  If we are to survive, that seems to be an inevitable conclusion.  How will we continue to evolve successful operations?  Answer, by exploring, on demand, whatever  group options appear.  We certainly won't thrive by refusing to go where context is forcing us to go.  Our last great depression was both the result and cause of a confluence of factors, yet we traversed it by aggressively exploring options.  The rate of bold activities explored during the 1930s rivals in scope those explored during the 1860s and 1770s-1780s.  See a calendar of some of the notable events and dates during the 1930s.

How should an investor leverage these sweeping insights to shepherd short and long term returns?  As a component in one, particular market-amoeba, the obvious lesson is to continuously invest in your market platform, not just your isolated trades.  The surest way to lose market value is to degrade the market platform which allows value creation.

Rather than endorsing MMT as an ideology, I've specifically only provided links revealing operational facts.  The biological approach is that any and all methodologies are incessant works in progress, and that survival comes ONLY with continuous, full re-integration of all emerging approaches, followed by relaxation to the leanest subset fitting a fleeting context.  Our only hope, as both Ben Franklin & FDR cautioned, is for ideologues of all stripes to fully engage, openly share, and honestly compromise views in light of rapidly unfolding operational reality. There is always less time than we believe.

But while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings.

- Franklin D. Roosevelt

For those further interested in MMT, here is an early attempt to enclose most of the operational insights that have come to be loosely described as Modern Monetary Theory.  It's an unfortunate name.  A more descriptive term like "A Listing of Current Monetary Operations" would be more accurate, but as usual, mobs and markets and acronyms come to be ruled by logic only after the fact, if ever.  Another useful review of current participants has also appeared, although there are even more.  See: "Modern Monetary Operations"

It's clear that the logic & concepts reviewed by current MMT authors is quite old, not new.  Rather, inter-twined questions about the inseparable concepts of credit-currency-criminology-policy have simply taken time to be discussed more widely.  The topics are still not adequately re-integrated at the scale demanded by our growing operations.  We need to accelerate propagation of useful ideas widely, not just refine them in small circles.  Here are a few more historical references that I've found to be particularly useful for enlarging group perspective on these topics.

“Constitutional” Conservatives v. “Constitutional” Liberals

History of the Legal Tender Paper Money Issued During the Great Rebellion, Being a Loan Without Interest and a National Currency : 1869

Henry Charles Carey, (argued for building on the precedent of non-debt-based fiat money and making the greenback system permanent).

Greenback Dollar.

Money and the Price System - CH Douglas

The Monopoly of Credit - CH Douglas

The Conquest of Poverty - Gerald Gratten McGeer

The Federal Reserve We Need

Fifteen Fatal Fallacies of Financial Fundamentalism - William Vickrey, Nobel Prize winner, 1996

Wynne Godley (popularized the "sectoral balances" concept)

Functional Finance and the Federal Debt - Abba Lerner

Tom Eliot (drafted the social security bill)

Modern Central Bank Operations – The General Principles

A Simple Business Card Economy

Some Neighbors Arrive (a model of MMT)

Related Articles

Articles by Roger Erickson

Opinion and Analysis blog articles on Modern Monetary Theory

About the Author

roger-erickson Roger Erickson is a systems entrepreneur based in Maryland. He worked for years in neurophysiology system research, at the Humboldt Stiftung, MIT, Yale, and NIMH before becoming more interested in community, business and market systems. Roger's newest interests are being pursued through several startups, as well as pilot agriculture commercialization projects with the USDA.

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  1. Robert Kahn says :

    I believe that there is a fundamental flaw in the premises of MMT, and while the example I propose
    to illustrate that flaw is far from a proof, it should make clear the risk associated with thinking of the
    elasticity of money as an unmitigated good for any
    society which produces money without constraint.
    In the biological world, all creatures are both consumers and users of energy. Because of seasonal
    changes, many engage in savings, both to survive the
    shortfall of winter, or to migrate to energy rich
    territory. For most, the savings are incorporated
    into their bodies, or stored in some external way.
    All these creatures have one factor in common.
    When they can no longer sustain themselves thru
    their own activities, they die. They do not retire.
    Humans find this reality unacceptable, and so as
    individuals, families or societies they prepare for
    those years by the accumulation of savings, the
    equivalent of the polar bear's fat as it enters hibernation. The quantity AND quality of that
    stored energy is the margin between life and death.
    If the energy content of that fat were to degrade
    rapidly, (qualitative loss of value) could result in
    Now, no one FORCES us to save for the future in a
    medium which can lose value relative to the things
    needed for the sustenance of life. We could, in an-
    ticipation of life after productive work, choose to
    accumulate our savings in the REAL THINGS which
    we anticipate that we will need. And there is no
    absolute requirement that FORCES the UNIT OF
    ACCOUNT and medium of exchange to fail to keep
    up with the production of REAL WEALTH that keeps
    it as a reliable STORE OF VALUE. Unfortunately,
    human nature, as demonstrated via human history, has shown a recurring tendency to expand the
    former at the expense of the latter. The unimpeachable logic of MMT is an engraved invitation to repeat the experiment once again.

  2. Nathan says :

    First our "economic theorists" tied the study to physics, now someone has the brilliant idea to try to relate the study to "biology" - Brilliant! However, what EVERYONE fails to understand is that HUMAN EMOTION always mucks things up - EVERYTIME. You can not create even the most simplistic model of economics without accounting for individual, emotionally-based, IRRATIONAL human behavior.

  3. Derryl Hermanutz says :

    As an advocate of the critical analysis expounded by money system reformers like CH Douglas, Irving Fisher and Hyman Minsky, I agree in principle with Roger's thinking, but there is a critical difference between the 300+ million molecules that comprise an amoeba and the 300+ million people who comprise America.

    Each molecule in the amoeba subordinates any 'private' interests it may have to the interests of the organism as a whole. Indeed, a molecule is only incorporated into the structure of an organism because it WILL serve the interests of the organism. Harmful or unneeded molecules are expelled as "waste". Everybody within the cell membrane is a necessary and beneficially functional part of "us". Everything outside the membrane is either food that is potentially part of us, or danger to us that we seek to avoid, or of no interest to us.

    America, by contrast, is not an "organism" in the biological sense, because the component molecules that find themselves existing within the arbitrary geographical membrane of this 'nation' harbor competing interests. All of the molecules within the amoeba see their private interest in complete harmony with the group interest of the organism, so all of these molecules freely share information, freely distribute resources where they are needed, and unanimously "cooperate" toward a flourishing of the life of the organism as a whole.

    Some Americans seek to withhold information from others in order to gain a private advantage. Some Americans actively seek to deprive others of needed resources, so that they can take a gluttonous share of resources for themselves. "Politics" is the sphere of national activity where various competing interests strive to have their private interest recognized as the 'national' interest, so that group policy serves their interest at the expense of their competitors.

    A closer biological analogy to politics is the bumblebee dance to convince the hive to "follow me" to the optimal food source. The most convincing dancer "wins", and the hive invests its energy resources following the winner to the faraway flower field to harvest their return. Except bees share the fruits of their labors according to Marx's dictum, "to each according to their need" (which, incidentally, is how a "functional" family distributes its resources to its members, because each member identifies itself with the whole and 'selflessly' provides goods and services and surrenders resources to the needy members); whereas human political winners plunder the honey treasury for private gain at public expense.

    Humans who find ourselves born within the geographical boundaries of a place that calls itself a "nation" have no biological imperative to identify ourselves and align our interests with the good of the whole. Leopold Kohr (The Breakdown of Nations) believes our nations are way too big and it is absurd to expect individuals who live thousands of miles away from each other in different economic and geological circumstances to identify themselves with their too large 'nation'. I agree.

    Reality also agrees, as there is certainly no unanimity of purpose among the members of our enormous modern 'nations'. Rather, there is winner take all, devil take the hindmost competition between the members. Trillions of dollars of military spending serves the interests of the military-industrial complex, but few would agree that this enormous consumption of resources serves the interests of "America". Yet militarism has been and remains official "US" policy, and the spending only increases.

    Private interests hijack national power structures to divert national resources to themselves at the expense of the organism. In biology this is equivalent to "cancer", which, unless eradicated, kills its host. On Wall St the cancer cells told each other, "IBG, YBG. By the time our toxic financial products destroy the system, I'll be gone, you'll be gone, and we will take the personal fortunes we extracted with us." There are many paradisical places on this planet where a few million American dollars will fund a very nice rest of your life. To anyone who is not plagued with a conscience, it is distinctly in their interest to rob the whole to enrich themselves, so we cannot argue that they are irrationally destroying the foundation of their existence as is the case among the cancer cells in a human body, who die when the body dies, because cancer cells can't "emigrate", or retreat to a luxurious subsistence behind the well guarded walls of gated communities.

    In the 1920s and 30s both CH Douglas and Irving Fisher clearly exposed the arithmetic flaws in the world's money systems where all of the money is issued by privately owned national banking systems as debt at interest. Depression is the inevitable result. And monetary collapse and Depression happened, in 1929 and in 2008. The reformers' arithmetic analysis is incontrovertible. The truth of their conclusions cannot be reasonably denied. Yet none of the kinds of reforms that would actually correct the arithmetic flaws have ever been considered at the official policy level, let alone legislated and implemented.

    Douglas and Fisher write clearly and they are easy to understand by people who are not specialists in financial economics. It's not as if politicians and governments and economists have not been exposed to correct explanations of the causes of our financial woes, and shown the kinds of reforms that would solve these problems. But the reformers have been rejected, and I have concluded that this is so because monetary reform does not serve the interests of the powers who operate the money systems and the governments.

    Minsky, whose instability hypothesis implies its solution: rein in the money creating bankers; is actively hated by bankers and their apologists on the financial oped pages. In 2009 or 2010 (I forget) Bank of Canada governor Mark Carney brought up Hyman Minsky at the central bankers' annual fest in Jackson Hole, and for weeks afterward Carney was pilloried by the Bay St apologists in the Financial Post for daring to raise the specter of the analyst who suggested that bankers are not individually and collectively "prudent" and thus constitutionally incapable of generating financial stability.

    Clear rational analysis of the arithmetic problems that plague modern money systems has no influence on the people who control those systems. They have their own "reasons" for maintaining the status quo and repelling reform. Their reasons are their "values", the desires that motivate them. "Our" reasons, and the monetary reforms that are implied by our reasons, are the outcomes that we want the system to generate. But these are different than the outcomes that the powers who control the money system want the system to generate. They are not "making mistakes" that generate "perverse outcomes". The system is functioning perfectly well in service of their private interests, though these are the antithesis of "our" interests.

    So we can explain until we're blue in the face why the money system as currently structured will inevitably generate the exact 'perverse' outcomes it in fact generates, but the powers don't see this as a "problem". Indeed, the outcomes that are actually generated are the outcomes that are intended, that serve the private interests of the operators of the system. A whole lot of people get extremely rich and powerful within the status quo. And as Douglas wrote in his 1936 pamphlet, "The Tragedy of Human Effort",

    "So as far as the present situation is concerned, the regular forces (i.e. police and military) of the realm are the last sanctions of law and order within the realm, and law and order can be identified with the operation of the financial system as it exists at the present time. There is no serious financial reform which can be inaugurated within the framework of the present legal system, except by those in CONTROL of the existing financial system. There is no intention whatever on the part of those in control of the existing financial system to change that system to their disadvantage, and there is no effective change to the financial system which can be made without depriving its present controllers of their absolute power. I believe the foregoing statement to be axiomatic, and any form of strategy or argument which traverses any of them would certainly seem to me to be lacking in realism."

    So Douglas is saying, and I agree, that what we see is what we get from the current operators of the financial system, and any effort to 'reform' them means going to war against the money power that owns the police state, the military state, the corporate state, the government, all of the organs of mass media, and the violent and unequivocal support of all the millionaires and billionaires and political powers (and wannabe rich and powerful; and their intellectual storm troopers in academia and mass media) who owe everything to the current system. What weapons, what arsenals do we array against this power? Sweet enlightened reason.

    The Roman Empire, the violation of republican "common interests" by private interests, lasted from 63 BC when Julius crossed the Rubicon River and effectively became emperor, until 410 AD when Alaric and the Germanic Vandals sacked the mighty city. No power in the world could bring down the corrupt emperors and their colluding minions for over 4 centuries. Sweet enlightened reason doesn't stand a chance against the American Empire and its financial masters. And any monetary theorist who believe they can get different outcomes without first defeating the powers who own and operate the current money system, are “lacking in realism”.

  4. Admin (Member) Email says :

    @ Robert Kahn

    Well presented comment and a valid point raised.

    Some other commenter may elaborate and explain better the MMT position, but I'll start the discussion.

    My understanding is that MMT views taxation as the vehicle to prevent the storage of excess fat which becomes your "fat of lower quality." The concept is that by creation of just enough fiat to meet the growth demand of an economy a stable currency value can be maintained. The response when inflation starts is to tax the excess currency away. This is analogous to the Fed selling bonds, raising interest rates and reserve requirements to soak up excess currency.

    Obviously, the process by which taxation could be used to control inflation is not an obvious one because that involves political processes and some interests will dominate all the others so the definition of what is to be taxed, how much tax should be imposed and definition of implementation timelines will be distorted by those forces that have the upper hand politically.

    The current system of central bank control of currencies is a holdover from the days of commodity based currencies (called "gold standard," although silver was also a base). It has persisted because it has been a way to keep abject political action from interfering at the daily operational level with the maintenance of money supply. In return for this "service" to the public the banks derive compensation in the form of interest and the amount of money that governments can spend is limited by the amount of interest they can carry.

    Now we come to the crux of the matter. When the amount of interest becomes too burdensome to a government the amount of additional money that the government can create in the private sector through accumulating deficits dries up. The productivity of the private sector is diminished because currency needed for growth, indeed to maintain current production in the worst cases, dries up. What currency the government does recirculate through taxation goes increasingly to pay interest. The result is slow growth, zero growth, or, in the worst cases, depression (negative growth), while wealth increasingly concentrates at the top.

    So the public pays a high price to hire the bankers to control the money supply and fight inflation. The price can keep rising progressively until substantial production is devoted to interest payments and wealth accumulates with the rentiers (those with the wealth) and the amount of production that accrues to the general public (the 99% or the 90% or the 80%, the exact percentage is irrelevant) degrades to ever lessening amounts.

    An essential issue raised by MMT addresses the inefficiency for society as a whole to have the banks the creator and comptroller of the currency. A fundamental question is: Why should the U.S. government pay interest to use U.S. currency?

    The answer is, of course, that it is done (government pays interest) to compensate the banks for controlling the value of the currency. Since the currency has devalued by some 95% (+/-) over the past 99 years I would argue the bill has been way too high for the service provided.

    The exact process for controlling currency value needs to be worked out, but MMT offers options that appear to have much greater potential for providing the opportunity for material success to a much broader distribution of the public than the public debt system for creating money that has twice bankrupted the Main Street economy in the last 80 years.

    Several of my colleagues have suggested that the situation could be improved if the banks paid interest to the government instead of the other way around. Thus, currency would be Treasury notes (instead of Federal Reserve notes) as the interest free source of money, while the debt form of money would be issued by the government in terms of bank bonds on which the government would collect interest, the amount varying depending on the economic conditions, growth rates, employment levels, inflation, etc.

    The Fed could still have a central bank role and continue its mission to service the banks, but would pay some level of interest to the government which would ultimately control monetary policy. The situation which has been in force until now is that the banks are the creators of money and the government the user. The roles would be reversed under the MMT proposals: The government would be the creator of money and the banks would be the users.

    The supporters of the current system have created a public mindset that the government can't do anything right and "free enterprise" is the way to get efficiency. Unfortunately, we now have oligarchy and that is far from free enterprise. And it is difficult to understand how the government could have mismanaged the economy seen on Main Street as poorly as the oligarchs have.

    These arguments are ones I would like to see debated broadly. The one thing I am sure of is the repeated failure throughout history having banks control nations clearly points to the need for a new paradigm.

    John Lounsbury

  5. Bill Andriette says :

    The points Derryl Hermanutz makes about the varying potentiality of macro systems to be 'gamed' by components are nicely modeled by the amoeba 'dicty' itself. See here:

    Close family ties keep cheaters in check: Why almost all multicellular organisms begin life as a single cell

    Hermanutz says: "Leopold Kohr (The Breakdown of Nations) believes our nations are way too big and it is absurd to expect individuals who live thousands of miles away from each other in different economic and geological circumstances to identify themselves with their too large 'nation'."

    The fascinating claim operationalized in this study on dicty – and presumably upscalable to larger lifeforms – is that organismic intracooperation (eg,readiness of internal component to sacrifice themsleves) depends on periodic genetic bottlenecks – think sperm meets egg – producing close relatedness of the organism's daughter-cells. Without this, cells have more incentive to 'cancerously' benefit at the expense of the organism.

    Article & comments are richly provocative – many thanks.



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