Wednesday, December 18, 2013


(Commentary posted by Roger Erickson - replicated from a comment first posted Dec, 2012 at Seeking Alpha)


Every citizen should learn the rudiments of Situational Awareness by, say, age 10, so that we as a people can keep exploring real national options, not just working at looting one another.

Teamwork. Surely that's not a difficult concept in such a sports-mad country?

Teamwork, like any goal, requires assessment systems, so we can practice before seeing if we can be successful in novel situations. Successful outcomes can always be interpreted in short, medium and long-term metrics. How about these familiar standbys?
.. fiat currency accounting?
.. proportional population employment?
.. survival of the country (based on capabilities & affinity ... of US citizens).

No citizen can assess what they can do for their country if they don't understand the basic operations listed above, starting with fiat currency.

Yes, we already have these measures that could let the public track success, but that doesn't mean that they're used. Largely because most citizens don't learn much about policy tools we already possess. Most of our problems were, in fact, taken care of by the Automatic Stabilizers enacted during the 1930s-1940s (social security, FDIC, unemployment benefits, etc). The only one remaining is Control Fraud (google William K. Black), and that's only because we let crooks talk us into deregulating financial crime, right up to repealing Glass-Steagall.

Everything else comes down to a fight between merchants and citizens, waged through the currency supply, either restricting it to preserve the buying power of hoarded cash, or letting it depreciate to continuously grow liquidity. Let's see how many grasp the following argument.

How do we afford to pay the "fiat interest on fiat bonds."

If carried far enough, that discussion eventually leads to 2 points.

First, we can't fail to pay the interest, since we can always generate as much fiat liquidity units as we want.

So, second, the argument reduces to either:
a) Arbitrarily maintaining the purchasing power of previously hoarded fiat (liquidity units), by progressively depriving an increasingly complex economy of both relative liquidity AND return-on-coordination [i.e., pay the fiat interest by draining private savings of previously issued currency; even though population & net capabilities... are both increasing]. [Even fools don't want that, when faced with a choice. Only pure sociopaths do.]
b) Instead, enlarge the fiat currency base [the unit of liquidity] with expanded issuance (public spending), thereby diluting the absolute buying power of yesterday's liquidity units. Why? In order to provide enough liquidity to readily DENOMINATE and hence rapidly explore the expanding options of tomorrow's return-on-coordination. Coordination possible from the pairing of more people with more capabilities.

That is the "SOCIAL-SPECIES DILEMMA." Evolve and stay in the adaptive race, by organizing on a larger scale ... or ... become a has been culture, and become either extinct or a domesticated lunch source for some other, more rapidly adapting species - i.e., one optimizing it's liquidity in order to explore expanding options faster than your culture does.

People who save excessively, i.e., hoard fiat beyond liquidity needs, are hoarding today's output and thereby depriving their grandchildren of expanded options.

Our grandchildren's options are reduced without our full investment in generating those options. Our Output Gap = grandchildren's Options Gap, and the relation is not linear, but exponential.

If our output gap is "j", their options gap is [j(e)], i.e., "j" to some unpredictable exponential "e".

That's how evolution has worked since the dawn of time. We die so that our descendents can be far more than we were. It's called sexual recombination, or cultural recombination, or - in general form - Options Recombination. (see the "Traveling Entrepreneurs Task")

This all follows from the simple, bottom-up dynamics of organized systems.

Walter Shewhart: "In all complex systems, the highest cost, by far, is the cost of coordination."

Obvious corollary: "In all complex systems, the highest RETURN, by far, is the RETURN on [investing in] coordination."


SeekingAlpha Commenter Zmartmoney added a key point.
To all who care to notice, you've just explained all our problems in one short treatise. The fact that 90% of the population does not understand any of what you wrote is our heritage - we, as a nation, are now virtually clueless as to how govt, business, or economies work and what role each of us plays in it. This is a testimony to the insidious nature and capabilities of politicians and their success in dragging the discussion into the ditch to drown it quietly while stealing from everyone in sight. The number of statesmen in the Legislative, Judicial, and Executive branches of our govt can be counted on two hands, and we'd probably argue about which ones those are. Our doom is sealed by our inability to grasp why we are here and what solutions, if any, might lead to our recovery to a state of being well informed and capable of making decisions in our personal lives and our govt. Sorry.

We as an informed electorate were not always this ignorant, nor do we need to remain that way. I hope we can someday prove him wrong. To do that, our grandchildren need more options, and they need to be AWARE of them. To provide those options and capabilities, we need to express more initiative (fiat) now, and also select where to apply it - wisely, not randomly.


Unknown said...

"we can't fail to pay the interest, since we can always generate as much fiat liquidity units as we want."

Ah yes, the royal "we".

Unknown said...

To your last paragraph: Hear! Hear!

My drop in the bucket of public education is in part an attempt to get the fiat accounting facts known and debated re the proposal to replace all $1 Federal Reserve notes with $1 coins. See "How The One-Dollar Coin Can Save The Economy" at

Roger Erickson said...

Amazing! Sun Tsu understood this, 2000+ years ago.

"Opportunities multiply as they are seized." - Sun Tzu

Roger Erickson said...

Rephrase Sun Tzu this way.

Explored opportunities always spawn factorially. As they do, they DENOMINATE their own numbers, as fiat currency.

Whatever we can do, we can denominate, as numerals quantifying the work we ask ourselves to do for one another.

Denomination tracks Public Initiative, not the inverse.

Roger Erickson said...

'At present, we are stealing the future, selling it in the present, and calling it GDP.'
- Paul Hawken