Representation Of Dynamic Creation In Double-Entry Bookkeeping. It Doesn't Exist.

   (Commentary posted by Roger Erickson)

Finally, an economist who speaks my language!

[Economics] "is a classic example of trying to understand something that is essentially dynamic - innovation - in a static model focused on calculating the optimal or the most efficient allocation of resources."

Ya think? NeoClassical economics is absolutely blind to the greatest return by far, the return on coordination.

To economists of all stripes, it's like the history of evolution, and the history of the universe, never happened. Only this quarter matters. Yeah right, to them and dinosaurs!

And Peter Thiel is an example of an idiot savant, so naive that it's laughable, no matter his Buffet-like talent at over-adapting to a transient context.

Speaking of evolution, it's the art of charting an optimal path through an unpredictable series of transient contexts, occurring with unpredictable intervals. Over-adapting to any transient context is the surest way to fail to prepare for the next one, and hence a good way to commit suicide.

Economics is the art of optimal asset allocation for a single context. 

Hence, long term cultural survival is about USING ECONOMIC ANALYSIS WITHIN PRACTICAL BOUNDS. Is that really so difficult?

Having economists dictate the limits of Aggregate Policy is like an architect letting a carpenter with a hammer dictate design limits. All you can end up with is dents in everything, and a lot of damage.

Risk management is NOT leadership. Nor is asset allocation. 

Where can cultural evolution take us? Where will it take us? Don't ask lawyers, and for humanity's sake, do NOT ask economists. All they can tell us are the risks to today of going to someplace else or becoming anything else tomorrow, and hence they also can't grasp the risk of NOT changing, and not going somewhere else from here.

Capiche?

Any nomad would understand the risk of not moving on. You'd think human Context Nomads would understand the risk of listening to lawyers & economists, when it comes to deciding where to go next.

Don't ask me why they won't.  Ask yourself.

Understanding Dynamic Idiocy

   (Commentary posted by Roger Erickson)

Understanding Dynamic [Idiocy]

Dynamic estimates of depleted fiat? Brought to you by the Committee to Neuter the Fiat?

Yes, it's true, Maud. These people never cease to amaze. They underdo themselves with every statement.

Is this Nature's way of saying "We don't touch logic" - or logical axioms either?

I fully expect them to try to restart a Ptolemaic Society, and commence postulating soap opera bubbles spinning to heavenly music. How much deeper can they wade into their own BS? This far in, the quicksand trap is sprung, and the only remedy appears to be rigor mortis.

Does anyone have a suitable diagram for representing the Deficit DeRanger System? Until then, this message will have to do.

Eurozone Instability & Austerity: Policymakers Still Discussing It To Death In Greece

   (Commentary posted by Roger Erickson)

Eurozone Instability & Austerity: Policymakers Still Discussing It To Death In Greece

Will this turn out any different than the parallel conference that Bill Mitchell is attending?

How to SANELY govern Europe?

If you read the Italy agenda throughout, it looks like a set-up & cover-up.

There will be token acknowledgement of people like Bill Mitchell on a panel, but the main topics & speakers are already set to "answer" the wrong questions. The whole conference outcome is already co-opted.

If these conferences are mainly about the right way to capitulate to the ECB NeoLiberals, then it's all over except the dwindling shouting.

The only possible outcomes are slow defeat ... or a riot at one or more of these conferences?

I'm just looking for signs of when the inevitable enough is finally enough. Parasites always drive adaptive aggregates to a phase shift in their organizational state - to either death or sweeping adaptive change. It's only a matter of time.

That will be the point where aggregates remind themselves that all contexts are transient, and that there is no fixed thesis.

We need no timeless thesis or antithesis, only unending synthesis.

Actually, we should honor and laugh at social parasites, for their service in driving our constant adaptive responses. Even if we get tired of swatting mosquitoes after the fact, and eventually drain whole swamps, we just generate novel new crops of our own parasites, as a fundamental outcome of our own social diversification. Diversity & self-parasites are dual aspects of autocatalysis.

The NeoLiberals will one day be dead. Long live the parasites!

Meanwhile, history repeats itself. Who could predict that modern Greece would be felled by a Trojan Bourse?

Let's Just Start Taxing Economic Policy Lobbying, Instead Of Sales & FICA Taxes?

   (Commentary posted by Roger Erickson)

Damage-Subtracted taxes, instead of Value-Added taxes? DST vs VAT?*

John Cochrane Explains Neo-Fisherism

Really? When is too much too much? Orthodox economics - like Aristocracy - has turned into nothing more than hoarding behavior. First people hoard static goods, then they soon hire academics to train shamans, create political-religions, and finally flood us with "economic" theory - in distracting attempts to hoard public fiat, and cultural perspective itself.

Personally, if I became President, I'd do something to seriously tax all this excessive economic theorizing that somehow accumulates as paid lobbying - unproductively dominated by "savers hoarding" instead of "labor producing" ...

... and get back to actively managing a highly dynamic economy based on more/faster/wider feedback based on better/faster/more cultural instrumentation.

Surely we must stop letting these hoards of Economic Policy beginners continue over-modeling an economy as an adequately described, static machine running at constant load.

A dynamic democracy is not a simple machine, it's an incredibly dynamic, rapidly evolving bio-cultural engine. Just stop trying to constrain our democracy & culture.

I've now read enough economics literature to stop reading it.

What do we need? Funny how those words cheques & balances come back to haunt us. :)

The original checks & balances intended by the Constitution were hacked within 8 years, when we let factions create political parties instead of sticking to our intended practice of finding consensus Desired Outcomes anew, with every year of changing context. The easiest time to betray any revolution is immediately, while rebels are still thinking that they won.

Disorders of hoarding behaviors in defined central nervous systems are continuously studied, yet those individual disorders are trivial compared to the impact of distributed hoarding behaviors in definable cultures, whether the cultural boundaries are defined by markets or nations. We won't address cultural hoarding until we invent new methods for training citizens to acknowledge and study it. By then, we'll have distributed disorders on a supra-cultural scale. Will the quality (including tempo) of our distributed discourse rise to meet that looming challenge, fast enough for humans to survive? Not if we don't start practicing audacious new methods, ASAP.

We need more methods, not models. And more practice, not just theory.


* A sin tax on public practice of economic theorizing, just like on other forms of gambling? Sure. Why is it ok for rich lobbyists to gamble with public policy, while poor people may only gamble their personal options in casinos (owned by rich people)? Yes, political parties are casinos, where naive voters are enticed to roll their dice - while not playing with House options, nor the Senate's. :(

Exporting Stasis: Euro-zone Politics & Social Instability Seem To Be Inching Towards A Showdown

(Commentary posted by Roger Erickson.)

Time to say goodbye? Shauble Calls on Italy to Pursue Structural Reform

German Finance Minister Wolfgang Schäuble called on Italy to pursue its ambitious structural reform efforts if it wants to boost its economic-growth prospects. “Especially since growth forecasts for Italy have been reduced recently, it’s important to reform and cut the debt level convincingly,” he said. Italian Prime Minister Matteo Renzi has presented ambitious and broad-based reforms, he added. “The Stability and Growth Pact is the foundation for politico-economic cohesion in Europe,” said Mr. Schäuble.

Euro-zone politics & social instability seem to be inching towards a showdown over making a simple choice. Neuter the fiat? Or allow cultural growth? Seems like an easy choice, for those able to think clearly, so what, exactly is Schäuble demanding? Three distinct interpretations come to mind, but they're all guesses.

#1 Is Schäuble calling for every country to be a net exporter, like Germany? Really?

It's hard to imagine a collection of stereotypical engineers ... who nevertheless won't admit that the sources/sinks of production/consumption (not the dimensionless liquidity units) have to roughly balance in a growing global economic system.

There still seems to be a widespread inability to separate liquidity units from saving units. Schäuble isn't the only one blind to the obvious.

Fiat currency is NOT the right vehicle for stable, long-term savings.
That is WHY the linguistic terms "asset appreciation" & "interest rate" were invented!
Labor wages can't be the ONLY variable that "inflates!"

I blame our outmoded education system - & Germany's too - for not including something so fundamental as a basic part of education. There is a difference between dynamic & static assets, and how they are denominated. Failure to grasp that is half killing many aspects of policy.

#2 On the other hand, perhaps Schäuble is drawing a line in the sand & saying - for EEU "politico-economic cohesion" - that there can be only one .... net exporter? Fine. He still doesn't come out & acknowledge the required, running sectoral balance between production & consumption - and the tolerance limits for deviations from it, in the form of demand leakages (savings). Has anyone met this guy, and hence have any idea what he's really thinking?

#3 Do you suppose that Schäuble's master plan is to export static assets to the future? :) Instead of exporting increasing options to future generations? Perhaps he has a point worth considering ... for maybe 5 seconds. Just imagine where we'd be if our grandparents had put every Model-T into long term storage, instead of using them at the time. :)  Fine again! If Schäuble's message is really all that valuable, surely the Europeans should just put HIM into cold storage, and preserve his valuable message for some time in the future, when his descendants will clamor to stop doing whatever they're doing, and instead do less. :)

He might want to take an extra pair of pj's to the cryo chamber, in case the slumber party lasts longer than he expects. Good way to export pj's too! :)

All joking aside. It's no longer clear what structure Schäuble is keen on reforming, but his own brain circuits might be the best place to start. It's rumored that vigorous exercise of both body & logic ward off Alzheimers and preserve the ability to think clearly.

Exporting clarity & Context Awareness? What a novel thought!  :)  Now that might be a way for Germans to have their exports and increase their dynamic value too!

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.

Putin Needs Reserve Feet to Put Into His Mouth?

commentary by Roger Erickson

In a truly odd post, Russian dictator Vlad the Pootie says: "If we want to get rid of unnecessary derivatives and raise the discipline and stability of the global financial system, we must go over to a multitude of global reserve currencies."

About what you'd expect from a midlevel KGB thug? Any nation is already free to adjust it's reserve currency holdings at will. As Warren Mosler has repeatedly noted, it doesn't matter what currency sales occur in, rather what currency people prefer to save liquid currency assets in.

Pootie goes on to say "If there was only one global reserve currency, the issuer of the currency would always be tempted to use it in its own interests." Ya think? Yet isn't the issuer of every currency free to act in the interests of the issuing country? Am I missing something here, except gang (i.e., class) warfare spilling across national borders?

Only rational thought that currently comes to my mind is that Pootie wants the Saudi's to stop denominating their oil contracts in $US. Given the volume of Saudi oil sales - and more importantly, the limits the Saudi prices establish in all oil pricing - that Saudi policy does tend to drive the currency of most oil-buyers a bit towards a peg with the US.

Still, every nation has many options, and there are always ways for agile group policy to explore all the options available to a given nation. Methinks Pootie doth complain too much?

When you really do have only cutthroats as friends, Disraeli's advice still rings true: "Never complain. Never explain." Or have I subjected that to backwardation? :)

ps: Can someone tell Pootie that we don't want a stable world economy? We absolutely need an insanely dynamic, agile world economy ... or we're toast.