Wednesday, May 2, 2012

There's boundless hope - it just requires indirection.

Is there hope, a banking cynic asks?  Not from that quarter - but ample hope is available from seemingly indirect sources.  Even after over 280 years of correspondence, direct discussion & multiple re-discovery, many still don't grasp that a fiat currency issuer doesn't "get" revenue in the form of currency [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 & all newcomers in.

With the cultural transition to a fiat currency system, all inter-dependencies linking currency to real issuer transactions become indirect, vs directly convertible.  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!   Fiat currency 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 insane 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.

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 & productivity rates would be soon forgotten.

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?

Whew!  Whaddya do?  Smoke something hallucinogenic & try to imagine altered states?  We actually tried that in the '50s-'60s, and it didn't scale. Legions of neglected kids scaled up Innocent 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 & immediately post 1776.  Too bad that - and emerging - literature is no longer widely enough read by US students. We are not adequately sampling the knowledge we already have. Watching unreality shows instead?

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.

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.

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 & behavioral burden unproductively tying up resources, replaced by the greater adaptive value of an increased tendency to cooperate, compromise & organize on a greater scale.

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 & 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 & simultaneously utilize vs concentrate available assets.  In short, chained expression & exposure beats store & hold.  In fact, real-time, cultural expression & 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.

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.

Is that YOUR culture and heritage?  Is there hope?  Of course there is.  Simply throw da bums out.  Each & every incumbent.  The sooner the better.  Starting with Geithner, Holder, & Bernanke, not to mention any & all responsible for letting such charlatans anywhere near our national policy.  Then distribute resources rapidly & widely enough to foster breakneck innovation, instead of austerity & 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.


Chewitup said...

Term limits!

farmland investment said...

"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." Ah, you mean like much of the Eurozone is now currently ruled from Berlin and Frankfurt!

Roger Erickson said...


the form of term limits already available involves self-imposed limits on credulity by the electorate. It's a simple choice. Use it. Don't vote for ANYONE who's a member of either political gang ... er .. party.
See what happens. Could it really be any worse? If change is needed, just do it.

Roger Erickson said...

@farmland investment

"much of the Eurozone is now currently ruled from Berlin and Frankfurt!"

Yes, pretty much.

Ralph Musgrave said...

I love that Benjamin Franklin article: "The Nature and Necessity of a Paper-Currency". I'll put a summary of it on my blog in a day or two for those who haven't time to read the whole thing.

Tom Hickey said...

Roger, if this had been put up elsewhere, I would have link to it here as must-read. Great job.

I would have to say, however, that "throw the bums out" doesn't imply they won't just be replaced with new bums.

The political selection process is skewed, as well as the academic selection process, since they favor the institutionalization of bummery. This is the fundamental issue to confront. Why are we getting such bums and even sociopaths at the top?

Roger Erickson said...

@ Tom Hickey

"Why are we getting such bums and even sociopaths at the top?"

System theory says it's a simple consequence of not getting young students enough early exposure to & PRACTICE AT pursuing return-on-coordination.

That's why a larger than expected proportion of team athletes do well in business & finance. They're well versed in, practiced at & comfortable with the payoff of team effort.

Short answer: Our elementary schools have to change focus dramatically, and soon.

Calgacus said...

With the cultural transition to a fiat currency system The key cultural transition happened millennia ago. All money is fiat money. Bad economics imposed purposeless & destructive constraints on it.

Sure, currency becomes useless as a stable store of value, since - by definition - fiat floats subsequent to public initiative. Quite wrong. When a government stops backing a worthless commodity like gold with its intrinsically valuable fiat money, it can become a better store of value.

After Nixon followed in Lincoln's & FDR's footsteps & closed the gold window, dollar savings worldwide grew enormously.

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. More or less, it already is. Everybody understands MMT in grade school or earlier. The problem is that as "education" proceeds, heads are increasingly fuddled by nonsense, culminating in the absolute nescience of the modern "economist".

Roger Erickson said...
This comment has been removed by the author.
Roger Erickson said...

It's increasingly clear what to achieve. Even MORE Democracy, in constantly bigger populations.

There's just no clarity on how to re-"shape" our constantly growing numbers into achieving, and then maintaining it? :)

Solution? Set up platforms that recruit the constantly expanding masses, and allow the task to be turned over to them?

Crowd-sourcing democracy? Wotta concept! :)

Crowd-sourcing scalable democracy?
.. Tougher every 9 months!!!