Monday, July 29, 2013

We Are Stupidly Rescinding the Fiscal/Monetary Constitution Written Largely by Marriner Eccles

Commentary by Roger Erickson

Between 1776 & 1787 we distilled a brilliantly terse prescriptive, not descriptive, approach to solving any emerging task, and called those "methods" the US Constitution. Our Constitution is a prescription for how to approach problems, not endlessly descriptive rules or recipes for exactly how to do anything in particular ... except preserve our agility in improving the quality of distributed decision-making.

Similary, way back in 1938, Marriner Eccles explained prescriptive, not descriptive methods for solving any emerging fiscal/monetary task - essentially a Fiat Currency Constitution. So what on Earth happened to us since? We actually rescinded our fiscal/monetary Constitution, and are half-way through rescinding key elements of our original Constitution.

Why do grandchildren have to re-learn lessons their grandparents learned the hard way, and their parents either forgot or never learned? What citizenry sends their offspring out the door unprepared for the entire range of things that are coming down the pike?

Our biggest hurdles involve retaining our own, distributed common sense - our ability to maintain and grow our quality of distributed decision-making - NOT the complexity of the tasks we face.

"On September 8, 1938, – Marriner S. Eccles – the former Chairman of the Board of Governors of the US Federal Reserve System (1934-1948) presented a speech – Address Responding to Criticisms Leveled by Orval Adams – ... which was a response to an earlier Speech made in May 1938 by Orval W. Adams, who was then the President of the American Bankers Association.

Marriner Eccles was a central banker who ... understood that fiscal ratios should not be the targets for policy. Rather, policy should concentrate on maximising real output and prosperity. Again, the the polar opposite to the policy positions taken today."

Kudos to Thorvald Moe of Norway for dredging up this particular speech, and to Bill Mitchell for further disseminating the link.


xan said...

1776 was the Declaration of Independence and the Constitution was written in 1787. Someone had to say it.

Roger Erickson said...

sadly, even Marriner Eccles either didn't completely understand fiat currency operations, or he at least used very sloppy semantics

"The individual cannot increase his income by taxation. The government can." Marriner Eccles, 1938

[In a fiat currency regime,] "Taxes for revenue are obsolete." Beardsley Ruml, 1946

For 80 years, we've been so close ... yet so far. Actually, for over 2000 years!

The Athenian Greeks certainly understood state money, by 350BC