Tuesday, June 26, 2012

9 Goals Every Citizen Must Endorse, to Rescue the USA



We have 312 million people in our culture. Keeping them aligned to common cause gets more difficult daily, but the payoff always outdoes any cost. Return on coordination works, no matter the cost of coordination. The only way to tune any complex "engine" is through mapping, instrumentation, analysis & testing.  It's the same in an economic engine with 312 million human pistons.

We've had smart people recognize & review some of the key factors which have limited our coordination, and depressed the outcome and well being of the people. For over 80 years, the surprisingly trivial task of right-sizing fiat currency supply and maintaining a functional, nationwide network of project peer review (banks) has been rate limiting. Given that as a chief impediment, lets set some goals, agree on a few things worth doing, and never tell people how to do them. That way we can get back to being amazed by the diversity of American ingenuity.

If all our obstacles involve credit, currency, criminology & policy capture, then our goal is clear.
Re-Occupy our own Country!


Let's put our heads together and consider how to address the fewest issues that matter most.  We are upset and angry. What happened? How did we get to this point. Most importantly, what are we going to do about it? It gets harder every day to keep a bigger population organized. So above all else, we need organized focus. Here are 4, inseparable issues to consider. Credit - Currency - Criminology - Policy.


1) CREDIT is organized sharing of time, effort, resources & risk among residents. It is the chief feature of an organized nation. When distributed credit is organized in productive patterns, a whole that is more than the sum of it’s parts appears, providing “return-on-coordination.” The group value of coordination dwarfs the personal values that citizens credit to one another, most of which are written off as the “cost of doing business,” or the “cost-of-coordination.” What has happened instead? The supposedly united States of America have let “banksters” usurp ownership of our credit patterns! Yet we are the real owners of our own, distributed credit! Banksters are just accountants who work for us. We don't work for them. We benefit only when we retain the return on our own coordination! Accountants should not unfairly profiteer from our credit, or act like they own it.  Let's not dictate how to do this in all instances, but:

TAKE BACK PRODUCTIVE PUBLIC REGULATION OF DISTRIBUTED PUBLIC CREDIT!!!
People who own assets sell them. Agile populations accelerate transition to new owners - and let people tackle new projects - via state-backed credit, extended through institutions called licensed banks.  The service banks are licensed & paid to perform is transaction review, rather improperly called credit rating.  The real rating involves whether the transaction will work, and whether it will benefit people, regions and nation.  Proper transaction rating involves interviewing all the professions and institutions affected by the proposed transaction or project.  Accountants track the numbers, but real bankers know their business community.  If it's only about the money, it's not going to work for long.  Bankers perform transaction reviews, but YOU collectively perform banker reviews, and set the standards.  Start doing so.

2) PUBLIC CURRENCY is a fluidly distributed accounting method used to organize distributed transactions into valuable patterns. Financial returns accrue when productive patterns of currency-use follow intelligent patterns of credit decisions. In short, currency follows real results, not the inverse.  We the people are more important than the currency which we create for our own use. We can create as much currency as we want, in unlimited quantities, and use it in any pattern we choose, based upon our distributed credit decisions. Our fiat currency is only as useful as the way in which we decide to use it! The quality of life for citizens of the USA depends upon the quality and tempo of our distributed decision-making, NOT upon how much fiat currency some individuals hoard and keep from distributed use.

We profit more when we hoard group capabilities and coordination methods, not fiat currency!  We can achieve most anything we the people set our minds to, and we can always make enough currency to denominate whatever we decide to do.  That's what fiat means.  Again, let's not dictate how, but:

TAKE BACK PRODUCTIVE REGULATION OF PUBLICLY CREATED CURRENCY SUPPLY!!!

There are many people who know currency operations inside out, and we're not utilizing their knowledge.  Studying economics without practicing operations is like studying ballistics while ignoring what gun you're using.  Dig in and see what our national options actually are.  You'll be amazed at all the things we're NOT doing right.

3) CRIMINOLOGY services protect us only if intelligently applied! What methods have banksters used to defraud the public? Which gray areas and cracks in our evolving operations do they hide in? Credit & currency are useful only if organized patterns of use are identified, understood and tolerance limits are actively regulated. Banking is a publicly-licensed set of methods whose tolerance limits must be widely known. Unproductive practices must be quickly noticed, and whistleblowers must be heard and protected. Offices receiving referrals must be adequately staffed and funded. Institutions for prosecuting distributed frauds and Control Frauds must be adequately staffed and funded. In short, a market economy must be constantly tuned by distributed feedback, not by mindlessly narrow central planning by a small number of banksters!  This sounds expensive, but remember that the return on coordination always dwarfs the cost of coordination.  If we were worried about the cost of coordination, we should have stayed overseas and never created the 50 united states of America.  Let's not dictate how, but:

TAKE BACK PUBLIC OWNERSHIP OF OUR OWN CRIMINOLOGY INSTITUTIONS!!! HAVE THEM WORK FOR THE PEOPLE, NOT FOR THE BANKSTERS. REJECT PARASITES!

As with banks, regulatory agencies from local police up to & beyond the FBI are staffed by criminology sub-specialists. Yet YOU collectively set the standards and mission of all staff in every one of those agencies. Start doing so.

4) Only PUBLIC OWNERSHIP OF POLICY can direct useful organization of credit, currency & criminology. These inseparable processes are far too important to be left to narrow lobbies which are today largely owned by banksters. Banksters see no further than currency profiteering, and are blind to the their actions have on the USA!   We have to save them from themselves.  It is up to us to re-regulate what banksters are and are not allowed to do. It is our own fault for letting things get this far. Democracy owners don't let their junior staff play games with the national controls. We simply have to take the reins back into adult hands, and reinstitute adequate community feedback.  Let's not even try to dictate how, but:

TAKE BACK PUBLIC OWNERSHIP OF DISTRIBUTED PUBLIC POLICY!!!
RETHINK METHODS FOR SELECTING PUBLIC DELEGATES. WE NEED INTELLIGENT, INFORMED DELEGATES TO BE THE DEFAULT, NOT THE REMARKABLE EXCEPTION!!!

How do we get there from here?


5) WE ALREADY HAVE ENOUGH, DIVERSE, EXPERTS in each of the fields mentioned here.
Sample and use them ALL! Not just the few, tired ideologues we hear from repeatedly!
If more Americans knew what diverse Americans already know, we wouldn't have to worry about our employment, growth rate or Output Gap! To coordinate, just seek and share information. And remember that credit, currency, criminology & policy must be integrated, not managed in isolation.

Then consider which things we have to start doing differently, ASAP.
Find out who's saying sensible things, different from what the banksters say.
Invite the different, sensible people currently ostracized by banksters.
Hear their input. Decide for yourself how to guide the USA down a different path.

6) Zero in on credit researchers & operations staff who have long practice and can explain many things about DISTRIBUTED PUBLIC CREDIT, and how it is organized to achieve amazing things.  For example, read & contact anthropologists who study the "anthropology of credit".  Adequately sample all professions with feedback on credit, but rely upon none alone.  

There is no point of stability in the natural world that is not a dynamic equilibrium between conflicting forces.  We want to be greater than the sum of our parts, not just let one part eat the other parts.

7) Seek people with operational experience, who know how our modern, FULLY FIAT CURRENCY SYSTEM actually works. We solved this once, in 1933, by rejecting the plutocrats and their gold standard, and by jailing frauds. Banksters have been systematically trying to undermine our credit, currency, criminology & even policy systems ever since! Don't let them!! This is not about falling prey to divide-and-conquer party politics.

If no one else, contact Warren Mosler - the functional reincarnation of Marriner Eccles, Fed Chief 1933-1951 - and be sure to discuss things at length with him. Understanding fiat currency is a process, not something to throw superficial slogans and presumptions at. Success depends on operations, not just intent.




8) Seek people with operational experience in the CRIMINOLOGY OF CONTROL FRAUD, including those who handled the last flare up, the S&L fraud crisis of 20 years ago. We handled that adroitly, but haven't even tried to prosecute the current banksters.

If no one else, invite Bill Black, Michael Patriarca, Janet Tavakoli, or Brooksley Born to speak in your town. And delve into how policy fraud happens, who makes it happen, and which regulatory cracks Control Frauds hide in and enlarge. Then consider what YOU have to do differently, in order to do something about this very distributed task.


9) Seek new, honest, INFORMED DELEGATES who neither want nor need to be professional politicians. Policy is what normal people participate in, as a rotating duty, not just for personal gain! This is where no one can be a better operational expert than you, yourself. Think about the policies affecting you, act on how your delegates are selected, consider what kind of people they are, and care who is actually selected.

Don't settle for wealthy ideologues who claim to have easy, guaranteed answers to complex, emerging issues that can't possibly be answered without continuous discussion and coordination. THERE ARE NO PAT ANSWERS! There is only reliable success from coordinated operations. Try it.


29 comments:

Anonymous said...

Peter Schiff was right

Ralph Musgrave said...

Re “take back productive public regulation of distributed public credit”, about 95% of the money in circulation was created by private banks, not the government or the Fed. Should private banks be allowed to create money? Abraham Lincoln thought not. He said, “The government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the government and the buying power of consumers.”

I.e. he favoured full reserve. The fractional versus full reserve argument is a complicated one, but I’m with Abraham Lincoln.

And here is Martin Wolf (chief economics correspondent of the Financial Times on the subject): “The essence of the contemporary monetary system is creation of money, out of nothing, by private banks' often foolish lending.”

Ralph Musgrave said...

Milton Friedman on the subject of why we don’t have full reserve:

“The vested political interests opposing it are too strong, and the citizens who would benefit both as taxpayers and as participants in economic activity are too unaware of its benefits and too disorganised to have any influence.” (Ch 3 of his book “A Program for Monetary Stability”.

Henry Ford, “It is well enough that the people of the nation do not understand our banking and monetary system, for if they did I believe there would be a revolution before tomorrow morning.”

Roger Erickson said...

We have full reserve, it's called the full faith & credit of the USA. That's what backs our fiat currency. Ask the FDIC.

When banks denominate loans, they're only debiting one account & crediting another, and taking responsibility for recommending that the transaction occur.

The assets they're assigning currency valuation to are already present.

In the semantic form you're using, Ralph, the concept of reserves is obsolete in a fiat currency system.

There's no fixed amount of money which we are or aren't lending. Fiat currency is always denominating public will & initiative, based on public trust.

The old concept of currency & banking reserves is a static-value concept. We live in a dynamic-value world.

If we can't run out of public initiative, then we can't run out of fiat currency.

Any further constraints only impair the quality & tempo of distributed decision-making, the very thing that generates adaptive rate, success & survival.

That holds for any aggregate of any social species, including human citizens in a modern nation state.

Ralph Musgrave said...

Roger, I agree that when a private bank grants a loan, it just “debits one account and credits another”. As to whether it “takes responsibility” for what it has done, that is only partially true, because the taxpayer (in the form of the FDIC in the US and similar entities in other countries) stands behind the deal, as you point out.

But what’s the taxpayer doing backing the creation of money based on silly loans (e.g. NINJA mortgages)? That’s the point Martin Wolf made. Given that private money creation cannot stand on its own two feet without government backing, why not just have government do the whole job?

According to one Bank of England study, the value of the TBTF subsidy exceeds total bank profits in recent decades. So the idea that private banks are free market or capitalist entities is a joke. See: http://www.voxeu.org/index.php?q=node/7314

Another difference between full and fractional reserve is that private banks can create so called savings out of thin air. In contrast, under full reserve, private banks have to find someone willing to do some genuine saving (i.e. abstain from consumption and store up money in a deposit account) before they can lend. I.e. fractional reserve gives rise to artificially low interest rates.

Put another way, whence the assumption that when new money enters the economy, it should be channelled to borrowing / investment rather than plain old consumer demand? The basic purpose of economic activity is to produce what the consumer wants.

But this is a very complicated subject, and I don’t claim to have fully got my head round it yet!!

Tom Hickey said...

Roger, I believe that Ralph is correct in this analysis, but I am not sure that going to full reserve banking is the optimal way to address the issues. Surely going back to a convertible fixed rate monetary system is not, and I think that free banking would be a disaster, too. Bill Mitchell as proposed bank nationalization. Warren has put forth reform proposals.

One thing is sure. The Big Rip-Off is based on the institutional arrangements of banking. something needs to be change. What is a matter for debate.

Ralph Musgrave said...

Another problem with fractional reserve is that it exacerbates instabilities. The money to stoke house prices prior to the crunch came from private banks. Steve Keen has pointed to the feed-back loop here. I.e. house prices rise, which makes them better collateral, which means more lending, which means house prices rise even further . . .then comes the bust.

If government controlled the money supply, interest rates would rise given irrational exuberance, and that would choke off speculative borrowing. More responsible or longer term borrowing would not be greatly affected because changes in short term rates do not have a big influence on long term rates.

For the above idea to work, one needs a moderately competent government of course, and given the clowns currently in charge, perhaps that’s unrealistic. So we have a choice as to who holds economic power: Wall Street crooks, or Neanderthal politicians.

Leverage said...

Roger, how the hell is giving printing power to banks (private criminogenic entities) going to work?

From your own demands follow a 'full reserve' based private financial capital system is preferable, while creating of fiat ex-nihilo should be something only the public (throught public entities) should do (but only ith proper check and balances so it can't be abused by TPTB and vested interests).

circuit said...

Roger, this is great stuff. Your comments really lay it out as it should be. Well done.

Just out of curiosity, are you acquainted with the work of economist Kenneth Boulding?

He's an important figure in Keynesian economics. His textbooks were standard for a while.

His approach combined systems theory with economic analysis. Also, he saw the economic development as similar to biological evolution.

I know Randy Wray was heavily influenced by Boulding.

Dan Kervick said...

The assets they're assigning currency valuation to are already present.

Not always, Roger. Sometimes all that is present is a wing and a prayer.

Dan Kervick said...

If we can't run out of public initiative, then we can't run out of fiat currency.

The issue isn't just the availability of currency. It is the distribution of purchasing power which gives access to limited real resources. If a bank loans a million dollars to Lefty's Shady Taco Emporium, then a lot of beef, corn flour and chili peppers go to Lefty that might otherwise go somewhere else. If Lefty is a flim-flam artist or a lazy scoundrel, the resources are wasted and the opportunity cost to the community and country are significant.

And if bank lending is funding Ponzi schemes of derivatives, someone is always hurt. Usually it's the last one in the scheme, while the ones who generated the scheme cash out of it early and make money for nothing.

Roger Erickson said...

Ralph, Tom, Leverage,
discuss this with Warren Mosler. There is no such thing as fractional reserve on a fully fiat system. There is nothing tangible we're lending out fractions of.

Re responsible management, let's just say we have limitless new options, and our tuning responsibility shifts from not-using vs using new tools, to learning how to use & regulate them responsibly.

Not trusting a banking system to work is rather like not trusting pilots to fly airplanes. Both can crash & burn, but there's a choice. Learn how to fly 'em, and create processes to adequately regulate the pilot trainin, plane construction & maintenance. Ditto for banks.

If we don't figure out how to leverage fiat currency & a banking system, someone else will. There's sure as hell no turning back. That would be like deciding NOT to develop an Air Force. We'd soon be toast.

The future's so bright we can't see it. Yet the only choice is to invest in better sunglasses and start looking anyway, ASAP.

Roger Erickson said...

@Circuit

No, can't recall a Kenneth Boulding. Thanks for the tip. Will look him up.

ps: If he had these insights long ago, what influences allowed his teaching to drift out of style? Seems VERY maladaptive to reduce coordination.

Is all due to getting fat & complacent?

Roger Erickson said...

@Circuit

Re Boulding. He was in on General Systems Theory with Bertalanffy.

Thanks again for the tip. I'll definitely read more about him.

Roger Erickson said...

my kind of guy!

For Boulding, economics and sociology were not social sciences—rather, they were all aspects of a single social science devoted to the study of human persons and their relationships (organizations). Boulding spearheaded an evolutionary (instead of equilibrium) approach to economics.
http://en.wikipedia.org/wiki/Kenneth_E._Boulding

Tom Hickey said...

Roger, definitely read Boulding. He is your kind of guy.

Tom Hickey said...

"Ralph, Tom, Leverage,
discuss this with Warren Mosler. There is no such thing as fractional reserve on a fully fiat system. There is nothing tangible we're lending out fractions of."

That's not the issue, Roger. It is how to limit private sector leverage so that it doesn't lead to financial instability price instability, and systemic risk.

The problem is that leverage tend toward the excessive pro-cyclically and then there is a correction, often painful.

One problem is that the ratio of outside money/inside money is too low. There's too much inside money created for safety and stability. There needs to be more financial stabilization in the system as it exists. We've learned that again the hard way from the crisis — at least some of us have, not TPTB.

Roger Erickson said...

This absolutely drives me up a wall!

Ken Boulding has quite a few books, listed here.
http://en.wikipedia.org/wiki/Kenneth_E._Boulding

Not a single one is available as an eBook, from Google books.
http://books.google.com/books?id=4yO5AAAAIAAJ&q=kenneth+boulding&dq=kenneth+boulding&hl=en&sa=X&ei=-xHqT6OOBuf50gHa5YilDQ&ved=0CDwQ6AEwAQ

This is all public-domain knowledge. There's no way the gateholding fee to buy knowledge can match the lost public benefit of distributing that knowledge to the public. Prolonged copyright is costing us far more than it's worth to the nation.

We're back to yet another set of inter-related issues.
AdaptiveRight and CopyRight
http://mikenormaneconomics.blogspot.com/2012/06/adaptiveright-and-copyright.html

Some of his articles can be found in scattered places, by googling "Kenneth Boulding pdf"

Roger Erickson said...

@Tom

"limit private sector leverage so that it doesn't lead to financial instability price instability, and systemic risk"

Exactly. That's simply the domain of people like Bill Black.

Operationally, wouldn't it be simpler to simply move the Fed back into the Treasury, and allow the Treasury to track it's own additions ("overdrafts") to it's own accounts?

At some point, this panic over creating & distributing currency comes down to provisioning the population. It can't be any more difficult than regulating how many babies, schools, playgrounds, cars or various tools, services & toys we make.

The rule of indirection still holds.
"For every intractable problem ... there is a solution, and that solution will involve another level of indirection."

We, not just orthodox economists, are ALL being way too conservative. Why, sometimes (in the past), we've thought up two completely different & insanely innovative policy changes before lunch! :)

Tom Hickey said...

Roger: "Operationally, wouldn't it be simpler to simply move the Fed back into the Treasury, and allow the Treasury to track it's own additions ("overdrafts") to it's own accounts?"

Yes, but the international monetary regime is now based on central banking. The US consolidating the cb and Tsy functions would have enormous reverberation through the system. So formal consolidation is the simple solution but not an easy one. IT would take entirely new thinking and will have to wait for that to dawn, I suspect. When operational reality is widely recognized and acknowledge then it will happen naturally.

Most people are still under the illusion that inflation is always and everywhere a monetary phenomenon, which on one level is a truism since inflation has to do with the price level, but it's not true the way Milton Friedman believed causally wrt to monetarism.

Roger Erickson said...

@Tom

Couldn't be any harder than the last 2 depressions, or the last 2 wars.

Why such fear over updating banking operations? We did a lot of it in 1933, and were better off for it.

Tom Hickey said...

Yes, Roger, it can be. The fact is that global population has exploded, there is greater interdependence resulting in greater system effects, including risks, and, in addition, increased complexity has make governance more tenuous and more costly in real resources required.

First, the world now faces unprecedented military technology and an enormous build-up of it. We are also standing at the edge of a new arms race that is including militarizing space, if not yet weaponizing it — although drone give a picture of technology under development and already being deployed. In addition surveillance technology and its deployment not only against civilians but also citizens is alarming.

This is being exacerbated by the desperate power grab of the West, led by the US to dominate globalization economically and and especially financially. This is resulting in a powerful alliance forming in opposition.

The world is also facing climate change that portends to raise earth's temperature range to historically high levels in a relatively fast timeframe. Scientists don't have a good handle on this yet due to complexity, but consistently reporting that the process is proceeding more quickly than anticipated.

Finally, do the population numbers. Malthus was wrong in his time because it did not anticipate technological innovation. What are humanities chances now the Nature is getting a re-do.

Lots of stuff coming together pretty much simultaneously.

Humanity has never been in a position quite like this before, and we are running ahead of our ability to discover new knowledge and and deploy its application.

This is a serious and unprecedented challenge that our species faces.

We need a leapfrog effect. Will we make to the singularity, or not. That is the question.

SchittReport said...

10) ELIMINATE APPROX. 100M STUPID PEOPLE

WHILE PTS. 1 TO 9 ARE GREAT, THEY WILL NOT WORK W/O PT.10

Roger Erickson said...

Tom,
Agreed, things look tough, but it's always been this way. Sumer fell, Egypt fell, Rome fell, Mayans, Incas & Aztecs fell. No matter what happens, we'll pick up the pieces & move on as though nothing happened.

SchittReport: You mean in the USA alone? Easier way to proceed is to stop training people to be ignorant, and then wait for turnover of the current crop. One generation would be fast, no need for any violence.

Tom Hickey said...

Roger, "No matter what happens, we'll pick up the pieces & move on as though nothing happened."

Eventually. Maybe. Extinction is aways a possibility. Not that I think it is a high probability. But the probability increases to the degree that its possibility is ignored.

But vast and long enduring changes have been the norm over a millennium, and when longer cycles are considered, some of the changes have been cataclysmic, especially climatic transitions.

Moreover, human beings have never previously possessed the technology for mass destruction, which changes the equation considerably, too, since in the past human beings have marshaled all offensive capabilities under extreme duress. No reason to think it is be different next time.

Leaving things to the invisible hand of Nature by trusting in so-called natural principles instead of using the superior intelligence that Nature has provided humanity with owing to millennia of evolution is daft.

Moreover, the presumption of maximizing shareholder value translates into maximizing the stock price. That is not always the result of good management for the firm, let alone for society. A lot of kind of pseudo-management is done by skirting fences and jumping over gates, instead of actually providing customer or clients with actual value, while simultaneously adding to already accumulated negative externality.

The planet is in a degree of trouble that it has never been in before because of human activity. Nature as ways of rebalancing ecologically and many of them are harsh.

Humans need to recognize this challenge and prune back ideas and institutions that are contributing the developing impasse before Nature steps in and begins taking care of herself. More less gentle slaps are already occurring and they are getting harsher.

The path driven by unbridled self-interest is the road to catastrophic failure, as the Greeks might said, due to a deadly combination of willful and self-serving ignorance and hubris ("over-weaning pride that blinds").

Jon said...

Critiques MMT towards the last part of the article. You might want to weigh-in, Tom or Mike.


The Follies of the Modern Greenbacker Movement

http://www.theamericanconservative.com/articles/the-follies-of-the-modern-greenbacker-movement/

Tom Hickey said...

"Critiques MMT towards the last part of the article. You might want to weigh-in, Tom or Mike."

Waste of time.

We had the Murphy-MMT debates already. Links hereat the MMT Wiki.

SchittReport said...

roger,

yes, the USA alone. the USA has transformed from the beacon of intellect and rationality to the abyss of stupidity and ignorance, in the space of 30 years or so.

w/o writing a thesis on this (which by the way is supported by collective research), the chinese have a saying 'there is no cure for stupidity', which means you cannot simply retrain these people. you cannot have a meritocracy or whatever other efficient, logical socio-economic system when over 1/3rd of your citizens are blanks.

therefore, the only logical conclusion is a mass reset in human capital.

SchittReport said...

case in point:

as has been pointed out many times on this fantastic blog, the only thing holding the US back in utilizing its resources properly to facilitate economic growth, is ignorance.

do you see any hope for change there roger? i can't.