If National Fiat = Public Initiative, Then A National Budget Surplus = Unused (Squandered) Public Initiative

(Commentary posted by Roger Erickson)



Static assets can be held in reserve, but that concept doesn't apply for dynamic assets, such as personal or public initiative, or fiat currency to a currency issuer.



You may wonder how entire governments end up expressing the exact opposite of something so simple. By 1001 ways? That's how a 10 year process of bureaucratic planning, left to the bureaucrats, ends up painting itself into a corner - as beautifully illustrated in the ongoing review by Bill Mitchell of the march to launch of the euro monetary union.

"Adherence to the objective of sound budgetary positions close to balance or in surplus will allow all Member States to deal with normal cyclical fluctuations while keeping the government deficit within the reference value of 3 % of GDP." [European Council, 1997b]

Using simple, algebraic substitution, one can translate that into the legal proposition that net national Public Initiative should be frozen, or partially wasted.

You can almost see where this 1st-grade thinking got started. If there was zero population growth and/or zero innovation rates, one might be tempted to see that rule as a way to keep adequate reserves of public initiative. However, that is, of course, NOT how things actually progress.

Attempting to use the EMU 1st-draft as permanently propagated policy is like requiring a child growing from age 2 to age 18 to spend the same amount of time motionless on the couch ... regardless of growth in size, capabilities or context. We're immediately talking criminal negligence! Seriously, everyone involved in the worldwide rape of the Middle Class should end up as defendants in a Nuremberg-like class-war--crimes trial. The scale of the social destruction is unprecedented.

As Bill notes, there has been a steady trickle of opposition even within orthodox economics.

"Most mainstream macroeconomic theoretical innovations since the 1970s (the New Classical rational expectations revolution associated with such names as Robert E. Lucas Jr., Edward Prescott, Thomas Sargent, Robert Barro etc, and the New Keynesian theorizing of Michael Woodford and many others) have turned out to be self-referential, inward-looking distractions at best. Research tended to be motivated by the internal logic, intellectual sunk capital and esthetic puzzles of established research programmes rather than by a powerful desire to understand how the economy works – let alone how the economy works during times of stress and financial instability. So the economics profession was caught unprepared when the crisis struck …" [Willem Buiter, 2009]

But to no avail. It's been too little, too meek, too late.

Unfortunately, a critical policy process was once again left to the presumed process owners. Equally inevitable, that entire field, systematically denied external feedback, promptly spiraled into self-referential insanity, divorced from the ongoing evolution of unpredictable reality. You can still see them, shuffling in front of their tenured mirrors, intellectual spittle showing at the side of their articles, mouthing "ISLM" reassuringly at their reflected images, and holding up large stacks of self-references as "overwhelming" proof. The only difference is in the public health profession, which finally sees the slack-jawed self-references for what they are, and has announced a diagnosis. Austerians.

The only step remaining is convalescence, and either therapeutic recovery or aggressive interventions. We can make recovery a face-saving, painfully drawn out adjustment, or simply change directions and drain the academic swamp, rather like George Marshall once did, to catalyze more agile responses to another war.

One Flew Over The Economic Cuckoo Nest? That may be a fascinating read, but it would have been more useful as a warning fiction, not as a review of experienced reality.
Now we're left wondering whether or not the main culprit, Big Purse, deserves all the blame, whether she should be fired, or whether all the actors are equally to blame ... for biasing the entire system in that direction, for letting the charade go on this far, and for participating in the first place! Instead of more letters to economists asking them what happened, why not pen letters to our aggregate self, asking ourselves "Whiskey, Tango Foxtrot happened?"

Our biggest regret, and shame, is that we all allowed this debacle to occur, under our very noses. And it is NOT just in Europe. Austerianism is an infectious cultural disease that works by perverting cultural embryology and stunting cultural development. The effects on specific cultures depends on local variables, but the outcomes are all bad. As always, prevention is the best cure, delivered via an educational vaccine, so that all citizens are immune to the regressive agents, whether memo-viruses, or a social Noirp.

Just put the book down, slowly back away, take a step outside ..... and return to discovered, operational reality?

Why? Here's why.

Ever notice that none of the characters in the original Cuckoo's Nest story had children, and were successfully reproducing, and then rearing productive adults? Those two themes don't interesect, which is reason enough to keep Economic Cuckoos in the realm of fiction, and out of the policy pages.

If we want a propagating future for the USA, do we want more aggregate options? Or do we want to sit on our fiat budgies, and be content to stare blankly at virtual non-reality, with simple, neat lines of ISLM drool on the cheeks of a declining, couch-potato nation?

Noirp Social Diseases and Lunchhaving by Proxy Syndrome

(Commentary posted by Roger Erickson)



Reading the daily news makes me realize that we're suffering from a highly distributed, scalable, Lunchhaving by Proxy Syndrome, where we're always convincing ourselves that something that is NOT wrong with us, is somehow to be considered as systemically wrong - all so that our Upper Looting Class sociopaths can get intellectually & culturally obese, by uselessly eating everyone else's lunches.

Take our politics, Please! We just saw the instant when most Republican voters could realize that they've been duped again ... or at least get a chance to start realizing it, since the self-deception actually runs to even deeper levels.

The Real Romney Captured on Tape Turns Out to Be a Sneering Plutocrat

Will voters catch on, soon enough to matter, and start selecting from an entirely different class of policy candidates? Only if we accelerate our electoral dynamics by the bare minimum now required. Those few Dems who actually exercise  their capability of reading WIDELY realized they'd been duped, about 6 months into Obama's admin. Prior to that the time lag to catch on was traditionally 4-8 years. When will GOP party members also start abandoning the gang process? You typically need a tattoo to join a criminal gang. To join a political gang, ... er, "party" you need to accept something more subtly damaging, a brain-taboo, or an agreement to stop thinking. It's infectious simply because it unburdens people from the calories required to engage their brains and actually think. Yet that culturally-infectious disease has been killing our culture ever since George Washington warned us not to become susceptible to it.

When will enough citizens catch on to our deeper self-deception, and junk the now-useless political party baggage altogether? If we ever get that far, then maybe we could get on with the simple task of setting national goals and organizing our national culture to achieve them? A country capable of setting and achieving adaptive goals? Now that sounds like a Desired Outcome worth achieving, and then maintaining. Doesn't sound difficult either. Why are we MAKING it so difficult?

Surely citizens now have a historic opportunity to realize that the real dupes are themselves - whenever they accept that they have only 2 choices?

Next, take our stupid fiscal policy, Pretty Please?!!

MMT - by describing fiat currency operations, and basic reserve-banking operations - addresses only a process, not the original reasons why we are misusing that process to begin with. We need wider sharing of common sense, across our growing lists of modern cultural operations. Call it modern operational operations. MOO! :)

Look, if a cow can exquisitely integrate gazillions of biochemical processes, within trillions of cells, of hundreds of types, across dozens of organs ... and make a behaving unit called a cow ... then surely a band of supposedly more intelligent humans can organize a national economy? Doesn't seem so difficult, in comparison. Yet, despite the obvious, expect many sheople to carry on saying baaah, by sheared statistics alone.

Yet why are we expressing so much collective stupidity, in the midst of so much distributed knowledge and skill? It's curious. Perhaps our culture is infected by a group-intelligence-altering cultural-parasite, a cultural-virus or even a cultural-prion agent?

That would help explain our baffling, unusual group behavior. On the cultural level, the closest concept I can think of is the INVERSE of a prion disease process. Instead of a diabolically unpredictable lock-&-key agent which recruits & perverts individual processes throughout a system, we now have a diabolically unpredictable system process managing to invent virtual, systemic but entirely nominal "process problems."

For effect, I'll call that inverted phenomenon a "Noirp" cultural disease, and even go on to predict higher order versions of the same cultural perversions, to be labeled Uoijd cultural diseases (double-inverse-font of "prion").

Our culture needs an advanced semantic immune system - just to protect itself from itself.

Just as Socrates saw through the Sophists who were saying that "your mother-dog is YOUR 'mother'" ... we need a modern day "Setarcos" to reverse our nonsense back to sense. Socrates' reverse-image might convince us of what we have backwards vs forward. Hopefully, she could remind us that "our nominal debt is our real private currency stock" rather than believing in what is functionally backwards, i.e., that our fiat currency accounting, "nominal deficit" figure is our real debt.

In the process of draining entirely nominal banking reserves by finagling double-entry accounting gimmicks, and then confusing those gimmicks for REAL process constraints, we're actually draining our situational awareness, and our group intelligence too! Both Socrates & his double agent Setarcos would be appalled at our lack of policy agility, operational agility and semantic agility. They're all linked.

Forget showbiz, there's no degeneracy like semantic degeneracy. As a remedy, let's just try to have our pace of group discourse keep up with dynamic situations! Loose paradigms sink economies.