Fiat Currency Operations For Dummies, 5yr Olds, and Politicians

(Commentary posted by Roger Erickson.)

Warren Mosler Explains Fiat Currency to Poland

Warren patiently makes some absolutely trivial points here, that should be the simplistic taking-off point for all other fiscal policy discussions:

1) lost output from current under-employment is always in danger of being greater than the sum of all prior output (simply because humanity is still growing to record capabilities; ~ min47 in the video)

2) our stds of living could be many multiples of current stds, if not for unemployment induced by misbalancing the ratio of net fiat_taxes to net_fiat_spending

3) our exponentially expanding options worth exploring ALWAYS exceed the number of people available to do available work
(see the following, about exponentially expanding aggregate options, cost of coordination, and return on coordination:

http://econintersect.com/b2evolution/blog2.php/2012/12/16/redefining-fiscal-policy-outcomes-so-that-our-definition-of-successful-investing-isn-t-depriving-our-grandchildren-of-options

http://seekingalpha.com/user/830328/comments/2

  [see "Falling Down The Elevator Shaft" comment]

http://econintersect.com/b2evolution/blog2.php/2011/12/04/how-individuals-fail-to-understand-evolving-markets   [see Traveling Entrepreneur Task] )

Warren is right that confusion about these drop-dead simple system axioms is the greatest systemic barrier to improving the level of discussion for all subsequent policy complications.

An understanding of fiat currency operations doesn't automatically answer all policy questions, but it is an absolutely necessary but not sufficient step in understanding all subsequent national policy options.

No policy foundation? Then no policy stability from an uninformed electorate. And a constrained Adaptive Rate to boot.