Thursday, May 29, 2014

Ask Not For Whom The Buck Stops. It Stops For You.

   (Commentary posted by Roger Erickson)

Bill Mitchell drops what should be a bombshell for the dimwits among NeoLiberal economists & their captive policy ideologues .... except that they're too dense and plodding to even notice!
‘Overt Monetary Financing’ (OMF), where the European Central Bank (ECB) uses its currency-issuing capacity to underwrite the [private savings] of the [growing Member Populations] is universally considered to be taboo among neo-liberals because they wrongly claim it will lead to hyperinflation.

Right-sizing sovereign currency supply to track population & economic dynamics is taboo? To whom? Dinosaurs?

What do you call a supposed brain that doesn't even notice - or care - that the blood supply ceased, and the heart stopped beating? Dead Culture Walking? That fleeting instant before it becomes officially brain dead?

If the population AND its demand for both transaction rate AND its diversity of transaction chains are all growing, then any grasp of dynamic systems would recognize that both currency supply AND currency distribution should follow those inputs dynamically, as a DEPENDENT VARIABLE.

In fact, that is EXACTLY what any currency system is supposed to do. Further, meeting that dynamic agility is exactly what led to evolution of fiat currency systems.

It should be clear to any high school student that a nation's currency system is quite analogous to their own body's circulatory system. How much net "flow" is required, and any required distribution of flow, is driven by circumstance-driven activity, as distributed pulls, not as a Central Planning push.

Does "hyper-inflation" of your blood supply occur very often? Does ANY demand to increase circulatory flow, either transiently or as a growth trend, automatically doom you to circulatory hyper-inflation? No? Why not? Why, precisely because functional physiologies have evolved multiple, feed-back driven, automatic stabilizers that dynamically right-size net and distributed circulatory flow to what ever state is demanded by context.

It takes a very screwed up circulatory system, and physiology, to allow one sector to die of gangrene.

Similarly, what on earth is so difficult about dynamically right-sizing currency supply for the highly-distributed, unpredictable needs of a dynamically chaotic national economy which also features trend growth?

Do nation-based human cultures have analogous feedback & auto-regulatory control systems, for keeping currency supply & circulation right-sized and right-distributed? Sure, they're called Aggregate Demand reporting systems, licensed banks, regulatory agencies, Central Banks, Treasury Agencies, and elected governments.

Our only problem is whether such institutions are staffed with zombie idiots ignoring one another, or by functionally intelligent citizens interested, willing & able to create a whole that is greater than the sum of its growing parts.

Why should any nation constrict the currency supply via the arbitrary decisions of too-few Central Planners, who are isolated from the full range of nation-wide feedback? Now we're just back to discussing how large populations can still be economically brain dead!

Let me repeat. The whole frigging point of a fiat currency system is to let distributed fiat - aka, Public Initiative - dictate the automatic creation AND DESTRUCTION of transaction-demanded currency, when & where needed. [Yes, licensed, regulated banks denominate endogenous fiat currency, yet they also destroy it as private loans are paid down. Most fraud involves under-regulated loans and under-regulated fees, not the existence or volume of fiat currency itself.]

Fiat currency simply denominates occurring transactions. In a large, growing economy, conflating the liquidity units with a stable store of value (and a preferred, long-term savings vehicle) are contradictory goals. Such scale-dependent oddities are easy tasks to work around, for those with the minimum of determination and intelligence. Citizens of multiple countries solved that rudimentary task over 80 years ago, and the history of diverse examples go back over 2000 years. If you can learn algebra 101, you can grasp fiat currency systems.

If you're worried about currency supply zooming to toxic levels, then please study ways to regulate the independent variable - the range of allowable transactions to be denominated - and NOT the dependent variable, the transaction-driven notation of liquidity units. Note that that sensible option runs into another conundrum, the desire of Control Frauds to allow vs regulate White Collar Crime. If you want a more organized system, then no, you cannot always do exactly what you personally want, whenever you happen to want to do it. Democracy and human culture require dynamic tolerance limits. Luckily, we're (potentially) intelligent enough to handle this, but only if we put some effort into practicing.

You either want a functioning democracy, evolving by constant practice, or you're willing to descend into anarchy.

How does a growing aggregate of evolving members avoid anarchy? Simply, by distributed practice. Just see what works, by tallying all feedback, and trying different things. We need selected methods and operations that work, not just stated outcomes. As one of many examples, Bill Mitchell's blog entry ends up discussing strategies for how member nations can exit a dysfunctional currency union. Yet he presents that as an option ONLY if the alternative option of introducing intelligent control of banking operations is exhausted, or considered beyond the capabilities of the isolated dimwits to whom we have given the keys to policy offices.

Where does this leave OUR aggregate? With a simple reminder. If war is too important to be left to the Generals, then surely EVERY democratic process is too important to be left to the PRESUMED process owners? Perhaps our dynamic currency supply needs are too important to be left to economists? Ya THINK???

How many economists know even the slightest thing about banking operations? Or understand the analogy to highly dynamic circulatory systems?

The answer is obvious, since we clearly have too many so-called economists worried about currency hyper-inflation, while failing to sense their own intellectual hyper-deflation. Why on Earth are YOU electing these inadequate people to national policy offices?

Ask not for whom the buck stops, it stops for you.


Roger Erickson said...

Paul Meli writes:

In other news…

…who would have thought?

Roger Erickson said...

everyone's confused about what snow job to blame it on :(

Matt Franko said...

"If you want a more organized system, then no, you cannot always do exactly what you personally want, whenever you happen to want to do it."

Ahhh, NOT according to libertarians Roger... and these people comprise 99.99% of our current people in the majesterial positions...


Matt Franko said...

" what on earth is so difficult about dynamically right-sizing currency supply for the highly-distributed, unpredictable needs of a dynamically chaotic national economy which also features trend growth?"

What is difficult about this is that all these libertarians in our administrative positions would have to admit that our govt institution possessed authority to do so.... so fuhgetaboudit with these people in position...