There is Boundless Hope for Resolving the Crisis

May 27th, 2012
in Op Ed

The Hope does not Reside in the Present Direction

Written by Roger Erickson, a version also posted at Mike Norman Economics

Is there hope, a banking cynic asks?   Not from that quarter (the banks) - but ample hope is available from seemingly indirect sources.  Even after over 280 years of ben-franklincorrespondence, direct discussion and multiple re-discovery, many still don't grasp that a fiat currency issuer doesn't "get" revenue in the form of currency.  For a reptable source, see Ben Franklin, 1727; "The Nature and Necessity of a Paper-Currency".

Did we just get a "huge boost in government revenue?" Before answering, one has to use a variant of the now famous "Clinton defense" - actually appropriate in this case. "Define revenue" for a fiat currency issuer. Asking that self-answering question opens the obvious escape from the policy quagmire-trap that the orthodox antkillers have skillfully trapped themselves and all newcomers in.

Follow up:

The Fiat Misdirection

With the cultural transition to a fiat currency system in 1972, all inter-dependencies linking currency to real issuer transactions become indirect, whereas they had been directly convertible when currency was linked to a hard asset (gold).  By definition, an issuer of fiat does not get revenue in the form of it's own fiat.   Fiat currency ISSUERS manage real input/output revenue budgets, and issue fiat currency ONLY for internal bookkeeping.  There is no revenue whatsoever involved in issuing fiat currency - just read a freakin' dictionary!  The USERS utilize fiat currency as an accurate proxy for LOCAL input/output budgets.

With large systems, fiat currency is the only way to scale national agility. Sure, currency becomes useless as a stable store of value, since - by definition - fiat floats subsequent to public initiative.  Yet that loss is negligible compared to the tremendous gains bestowed by unleashing public initiative from arbitrary constraints on rate of change of currency supply.  If we wanted to let someone else dictate how much currency could be in use - regardless of the volume of transactions waiting to be denominated - then we needn't have bothered with the 1776 Revolution, and could have remained placid subjects of some foreign royalty.

Fiat Currency is Meant to Serve Transaction Needs

It's puzzling to wonder why that system-agility aspect of a fiat currency system isn't made obvious to students early on, say in their first high school or middle school algebra class. Distributed understanding of that paradigm would unleash unimaginable amounts of latent potential in this country!   Even WWII mobilization and productivity rates would be soon forgotten with the rates of growth that could be achieved.

There's a deeper principle to question here.  Whenever ANY system - even a system made of 311 million citizens - grows to the extent where it starts introducing new levels of process indirection, what specific feedback channels must arise to recursively re-tune ... the vast number of distributed inter-dependency tolerance limits which already define the previous, exquisitely organized system-state?

Study History

Whew!  Whaddya do?  Smoke something hallucinogenic and try to imagine altered states?  We actually tried that in the '50s-'60s, and it didn't scale.  Legions of neglected kids scaled up fraud faster than their somnolent parents could imagine alternate paths to nirvana.   Yet there are plenty of obvious things to do, and the majority of what exists on the subject still remains the body of revolutionary literature distributed throughout the American colonies pre- and immediately post-1776.  Too bad that literature is no longer widely read by US students.

Wonderfully distributed natural selection is obviously at work, and at nested levels.  Adaptive rate will be driven NOT just by the ability to produce random variance, but by highly distributed sub-mechanisms able to sense and select adaptive value from the endlessly emerging, optional system configurations.   My gut tells me that there must also be selection for both local and global feedback channels able to represent nested levels of locally reversed entropy, as a guiding rule.  Net resource throughput is an obvious reference for both system tuning and expressions of it like human hoarding instincts.

The Adaptive Will Win

Given the presumed link to nested hoarding mechanisms, how is the net sum of nested hoarding properties in an adapting culture adjusted, to allow for the added return from organizing on yet another level? One is left imagining that, like simple systems displaying chemo-taxis, every system - no matter how complex - will exhibit "resource-taxis" in response to new resource gradients. In fact, resource-taxis as an emerging behavior will occur no matter what dimension the resource gradient appears in. The result is auto-catalytic selection of an altered system-state. Those cultures that can, will, and those that can do so sooner, will.  And those that can't, or can't fast enough, quickly go into the dustbin of history.

Which still leaves us with the question of what subtle, nested characteristics will continue to accelerate the RATE of settling into novel "resource-taxis" states, and thereby allow some larger aggregates to self-tune faster than other, seemingly competitive aggregates?

One clue is social behavior itself. At some point, individual "intelligence" - like excess muscles - becomes a metabolic and behavioral burden unproductively tying up resources, replaced by the greater adaptive value of an increased tendency to cooperate, compromise and organize on a greater scale.

Winning Systems have Total Greater than Sum of Parts

With larger aggregates, the greater local focus on minimal energy metabolism and greater specialization of labor allows net "group intelligence" to enlarge, by shifting from local to aggregate expression.   Cooperating groups outdo individuals, no matter how heroic any individual effort is.  Group intelligence simply scales beyond anything thing individual intelligence can muster.  That was the argument Ben Franklin used to get the Continental Congress to cooperate and pursue the added return on compromise available to them.   The outcome was the United States instead of divided colonies.

This analysis leads to a very familiar thesis, that national output follows aggregate resiliency, which follows aggregate adaptive rate. For those that didn't take biology 101, social adaptive rate follows distributed tendencies to optimally distribute and simultaneously utilize available assets rather than concentrate them. In short, chained expression and exposure beats store and hold.  In fact, real-time, cultural expression and exposure seems to be the cultural analog of genetic diploidy, the process of sampling more permutations of existing aggregate diversity per unit time.  Aggregate adaptive rate follows aggregate rate of exploring emerging aggregate permutations.

Seems obvious, once expressed.

The Luddite Misers can be Saved from Themselves

How do we get that approach baked into our cultural memetics*, so we can be a faster adapting, "eukaryotic" vs. a slower adapting "prokaryotic" culture?  Diversifying FASTER from a "more perfect union" is the goal, and our founding authors nailed the essentials quite some time ago.  Why not just let it happen, instead of - as bankers say - trying to freeze the status quo despite an unquestionably changing world?  Might as well bang our heads against the wall, and cede control to the newly emerging batch of idiot savant bankster royalty.

*"Memetics" is a cultural word-play on the word "genetics".  It defines whatever backbone complex anchors replication of all the memes propagated and recombined by an evolving culture.  In genetics, storage and recombination depends upon chromatin proteins complexes.  What the equivalent is for memetics is ill defined.

Is that YOUR culture and heritage? Is there hope? Of course there is. Simply throw da bums out - each andevery incumbent. The sooner the better.  Starting with Geithner, Holder, and Bernanke, not to mention any and all responsible for letting such charlatans anywhere near our national policy.  Then distribute resources rapidly and widely enough to foster breakneck innovation, instead of austerity and hibernation. There's no way to stop the future, only ways to survive it.  It really is about saving our Luddite misers from their own fallacies of composition and scale.

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Articles by Roger Erickson

Opinion and Analysis blog articles on Modern Monetary Theory


About the Author

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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