"Have National Fiat, Exploring New Ways to Use It" - Can We Just Make That Our Calling Card Once Again?

Commentary by Roger Erickson

How many citizens know where currency comes from, and can trace the flow of "fiat" currency - before, during and after the cocktail party, to both penthouses and gutters? Most people get completely confused about the differences between commodity or static value, organizational or dynamic value, and the liquidity units that connect all types of interchangeable capital - not to mention the relation between fiat currency creation and fiat taxes, and fiat interest rates to boot. (I wish we would!)

Bill Mitchell recently wrote that: "If people really understood that governments just borrow back their own spending, then the financial markets would be seen for what they are in relation to bond market activity – mendicants in receipt of privileged corporate welfare."

Well stated!

Surely Beardsley Ruml would have approved, since Taxes for Revenue Are Obsolete in any fiat currency regime (see p.35).

However, corporate welfare itself is neither good or bad. "How much" is the only question that matters.  Distributed banks - starting with the Primary Dealers (PDs) who are required to buy T-Bonds - are legitimate, publicly licensed, supposedly regulated, private contractors, just like every other member of the citizenry. The TERMS of their public contracts - and their public regulation - matter absolutely. Most banking lobbies eventually return to the issue of who gets to set interest rates and control much if not all access to accounting fees for regulating inter-personal credit. The main point is that the PD and other banks DON'T DESERVE SPECIAL TERMS! Only the same terms available to all other citizens.

Are there ANY bankers who are inventive entrepreneurs, other than in the sense that crooks and charlatans are? They just keep their little accounting records and get on the golf course by 3PM. It should NOT be allowed to get more complicated than that. As most experienced Senators will admit "We just decide what needs to be done, then we appropriate the currency to do it." Everything after that is just accounting details about draining obsolete banking-reserves from obscure Fed accounts, but that trivial job, however arcane, could be done by any accountant with a high-school education. THERE IS NO DERIVATIVE NEED for further expense in the accounting process. No need whatsoever for expensive suits, international meetings, limousines, or marble buildings. None whatsoever. If I were a union, I'd lobby to have the Federal Reserve replaced in it's entirety by Google Money or something equivalent, so we could reduce it to a simple Treasury Department accounting app. With all this confusion, all we're doing is dividing and conquering ourselves!

C'est la Vie! For now, back to the banks we're living with.

If the offered TERMS that banks get for their accounting and credit-rating services remain within SOCIALLY ADAPTABLE TOLERANCE LIMITS, then banks simplify public commerce by providing a self-adjusting monitor and regulator of inter-personal credit lines. What I call "ADAPTIVE" Warren Mosler calls "serving Public Purpose." Whatever you choose to call it, in that guise the profit from trafficking in T-bonds (still arbitrary) are at least seen as one way of adequately funding the Primary Dealer banks for legitimate services - so long as their personal salary profits get spent into the rest of the country, circulating along with everyone else's "money." As you likely know, since you've at least found the MNE blog, excessive and mal-distributed rates of hoarding vs investing "fiat liquidity" is where things go south, very quickly.

Mistaking liquidity for a static value, and hoarding it, requires foregoing dynamic options. Long term, that is ALWAYS a fatal mistake in an evolving world, where dynamic value is king, and can be chased only through adaptation. Accelerating adaptive rate always wins. Hoarding static assets rarely does, and never for long.

What does this mean for us? If the TERMS of various banking licenses are allowed to become mal-adaptive, and turn into obscene amounts of corporate welfare, then it's only because a public is failing to do it's own, adequately organized regulation, and the credit examiners are then accumulating and hoarding the very credit they're hired to simply analyze and report on! More importantly for our own national security, what matters even more is HOW QUICKLY we regain control of corporate welfare rates. Tempo is usually the biggest factor in maintaining the quality of distributed decision-making.

Doesn't this boil down to an OpenGovernance issue?

If bankers are grossly overpaid, whose fault is it? We can no longer re-regulate our own bankers, on a moments notice? Bullshit! Why CAN'T we? Diverting ourselves to endlessly arguing the details of the issue is admitting defeat - by expressing it! The public's beef has to be on principle and tempo, not on micromanaging the details. "We want outcomes appropriate for fulfilling our full aggregate demand!" And we want that with our morning coffee. Or else.

Who the hell is in charge of this country? It's citizens, or any arbitrary sub-class - acting like buffoon aristocrats? Isn't that the only issue that matters?

Why not invite a national labor conference - with every union and civic organization available - and make setting of banking terms the one and only theme? Recall any politician who fails to LEAD rather than sell-out. And for HEAVEN'S sake, quit electing buffoon politicians who DO sell-out.

Can some union make the setting of banking terms the plainly stated "#1 PLANK IN THE NEXT ELECTION" (and immediate recalls)? Cut the corporate welfare rates back down to a living wage, and voila - our biggest problem is half way to being solved. We can go back to exploring actual emerging national options, instead of unproductively staring at fat-cat banker navels. Until then, our national calling card remains "Have Fiat, Won't Use It."

Our calling card should be "Have National Fiat, Exploring New Ways to Use It."