Three Assumptions for Addressing Fiscal Policy Intelligently

This in in response to a request from Frank Li, to reduce description of fiat currency operations to three basic assumptions. Frank rejected my suggested approach, so I'm posting them here.

(1) The business of a [good] government is to support short, medium AND long term success of small, middle AND large size business communities.
a. Business is for short term profits, PLUS positioning for medium-term profits, PLUS staying in business long enough to guarantee long-term profits.
b. Adaptive profit strategies guaranteeing short, medium & long term survival leads to constantly growing jobs for more people, thereby generating the options required for continued growth.

(2) In some ways, a country must be run like a business or a family, or it will go bankrupt, but we must be aware of the subtle differences in operational strategy that apply to the different levels of organization. In every example of hierarchical organization, the "parent" level of policy management runs a "real-goods" budget, while ISSUING, in unlimited amounts, a fiat accounting system purely for internal bookkeeping. The "child" USERS of that accounting or currency system can run entirely on a "currency" budget precisely because their parent ISSUERS currency allows USERS to use that currency as an accurate proxy for local real-goods budgets. National-level organizations that ISSUE currency can go bankrupt ONLY by running out of real, natural resources, including it's people. An issuer of fiat currency can always issue as much or little of it's currency to account for public organization, and so it cannot go bankrupt in the sense of running out of accounting units. For currency USERS, bankruptcy in currency units reduces to being identical to bankruptcy in real-goods units.

(3) It’s both true and not exactly true to argue that the USA is not like a business or family. The responsibility of USA policy staff - our elected government - is to spend into existence as much currency as the nation needs to operate, but neither too much nor too little. The purpose of fiscal policy is to pursue the public goals of a growing population and it's growing business communities, while avoiding both extremes of either inflation or deflation. An excessive currency supply can contribute to inflation, and an insufficient currency supply can contribute to deflation. In addition, wrong headed employment and tax policies can allow personal income and savings distributions to be unproductively skewed to the point where the unpredictably distributed capabilities of emerging citizens cannot be optimally sampled, developed or utilized.


In the end, the social purpose of inventing a currency system is to ensure that any and all productive transactions that citizens agree should occur, can always proceed without delay ... a concept called liquidity. The purpose of a national currency is to provide liquidity for all social inventions, so that their development can be judged, without unnecesary delay, solely upon the diverse social feedback which eventually allows selection of a national survival path.