Tuesday, December 9, 2014

We Need Public Trust (And Scalable Verification Methods), Not Just Public Institutions

(Commentary posted by Roger Erickson)




In ongoing discussion with friends at the Public Banking Institute, we often return to a state of talking past one another.

It's obviously my fault. Trying to think ahead always seems to come across as opposition - especially if articulated clumsily. At least initially.

Guess I really do need more practice at saying "Yes, And" instead of "No, But."

It's not enough to think .... one needs to constantly PRACTICE all the arbitrary hand-shaking protocols too, just to effectively communicate with all parts of your own, diversifying electorate.

Does the following help?

Some of my PBI friends (not all) get so involved in local projects that they tend to forget about the implications of national policy.

I am NOT dismissing anything about Public Banking. In fact, I couldn't agree more. There should be many more Public Banks, at every level. Nationalize TBTJ mega-banks. "State-alize" many regional banks, and "County-ize" & "City-ize" many local banks. It's necessary.

That still won't be enough to restore our cultural agility. Not now, and not ever.

I am trying to think ahead, and consider why Public Banking will always be necessary but not sufficient. There are further issues that must be included in the mix. That's why I keep bringing up the "3i's" of contingency management.
Impact;
In-Flight;
Instigators.
...If you don't address all 3, simultaneously, you can't win (excepting luck).
That advice applies not just to current frictions, but also to our own future actions, and selves.

So one obvious implication sticks in my mind. No amount of practice at local tactics (or regional strategy) replaces interleaved attention to national policy. That's just common sense. The inverse is also true, of course. We need both, not either in isolation.

You cannot tell from the presence of public banks alone whether a public is ceding national policy space to NeoLiberal ideologues.

The archetypical Public Bank, the state Bank of North Dakota has had zero impact opposing the slow return of NeoLiberal national fiscal policy the past 80 years. There's no evidence that they even tried!

Meanwhile, the Federal Reserve, for example, is a Public Bank. Heck, Congress is a Public Institution too. 

None of that means that any public institution is immune to being co-opted by Control Frauds

Foxes will always seek to be appointed to head local, regional and national Hen Houses. Our need isn't just for more hen houses - which we always need. We ALSO need continuously evolving methods for keeping our own foxes under control.

Plus, those new methods must be more scalable than previous and current methods.

So I'm always thinking of ways to have our public banks AND our national policy too. To me, that's the minimal challenge worth pursuing. Otherwise, you're saying "No class war or Control Frauds in local politics, but they are ok in national government." Lots of luck with that approach.

That is not setting our sights high enough.

The root issue is trust (AND to verify).

If we can't trust private enterprise to run all banks, what can we trust private enterprise to run? Garbage collection? Police Departments? Our MICC?

If we want institutions we can trust, regulate the damn industries!

The root solution is regulatory methods.

What we really want is evolving methods for maintaining Public Regulation ... of all industry sectors, and all components, private or public. That timeless logic is the only way I see how to tackle our exponentially rising organizational tasks.

"More is Different" - it sure is. So how do growing human populations manage more of themselves?

By always bridging FROM current-scale methods TO our emerging, larger-scale behaviors, with NEW METHODS ... that's how. In plain words, that means by ALWAYS thinking ahead, and NOT just on what we're already working on today.

Every 50 years or less, we have a wholly new scale of organizational issues. Issues that today's methods and institutions won't adequately address.

How will we regulate all our emerging, scale-dependent activities?

Not by micromanaging every discipline, but by instilling subtle, new methods allowing us to continuously regulate distributed TRUST, and thereby cultural resiliency. The key issue is to constantly improve the quality (including tempo) of decision-making that is always increasingly distributed.

We can't do that by scaling up committees, or micromanaging existing processes.

Take the ancient example of siRNA allowing micro-regulation of massively larger genomes, and thereby eventually enabling massively multi-cellular species, eventually called Eukaryotes (e.g., humans). We couldn't have evolved just by having more "public" proteins. That's like expecting to put enough police cars on the streets to enforce all traffic laws. That approach - regulating self with more self - just won't scale.

Similarly, stages of larger-scale human culture were possible only after invention of language, writing and other miniaturized, "scalable" technologies.

Again. Self-regulation of more self, by micro-management WITH more self, just doesn't scale.

Replacing self-regulation with ingenious micro-regulation technology allows us to have our "more" and organize it too. All we need from our growing population is their feedback, not distributed-regulation with their actual selves.

Take the same principle applied to Blue Collar policing. The breakthrough method for retaining trust in police is public verification, i.e., not only adding more layers of "Public Policing" but adding miniature lapel-cameras to every cop on the beat.

Face it. We'll never trust enough of our accountants and bankers - public or private - until they wear lapel-cameras too, or something analogous.

What we're doing now is never enough, because there'll be more of everything tomorrow, and more is always different, because interdependencies that are insignificant at one scale eventually become significant - or overwhelming - at another scale.

Ancient cathedral builders learned that, the hard way. So do all people in all professions, ... but never fast enough.

Achieving Public Regulation comes down to inventing subtle new methods for monitoring key portions of increasingly distributed decision-making, so that we can maintain alignment across our growing electorate, and retain trust in ourselves.

There are always more insanely great things our aggregate can achieve .. but only if we invent ways to trust and verify the aggregate utility of our own, distributed actions.


Or regulate.



13 comments:

paul meli said...

Can local (non-FRBS) banks create state money?

If not, I don't see how they can fund growth.

The Just Gatekeeper said...

Two words: Credit Unions! :)

paul meli said...

"Credit Unions"

I already use a credit union, but the banksters are working hard to kill them (they get exemptions for not gambling with our deposits).

Eventually we'l be left with only safe deposit boxes or expose our savings to Wall Street gambling.

I wonder…are credit unions part of the FRBS? I suppose I could look it up, but if anyone knows…

paul meli said...

…apparently not…

http://www.frbsf.org/education/publications/doctor-econ/2005/march/credit-unions-regulation-supervision

Roger Erickson said...

Paul Meli asks: "Can local (non-FRBS) banks create state money? If not, I don't see how they can fund growth."

No, public banks can't fund NET growth.

Yet they CAN freely denominate local credit decisions. IF they have no opposition from national banking regulators (in the form of capital requirements, banking reserve policy, etc).

Actually, local courts could do the same thing, if they could enforce IOUs with enough agility.

Mosler's point has been that state banking commissioners already have the power to force private banks to do everything that Public Banks could supposedly do. It always comes down to public policy choices, and the methods for forming policy.

What we always need is Public Regulation, of everything, not just banks.
https://plus.google.com/104140272098689841413/posts/6qsByCJbGom


My view is that regional public banks are good practice & training grounds for retaining & scaling up perspective on national policy needs. Plus they do supply local methods for regulating locally distributed credit policy needs. They do not replace all the needs of national fiscal policy.

In general, a more distributed banking sector always seems like a good idea. The whole idea of fiat currency is decentralization, not Central Planning. That fits highly conserved biology principles.

Roger Erickson said...

ps: Current banking laws, e.g., capital reserve ratios & banking reserves, etc, just seem to favor a "capital"-centric approach to distributed decision-making, thereby retaining a social class structure based on previously hoarded fiat, obtained by any method whatsoever.

We'd have more cultural agility under a Regulatory-Centric approach to aggregate outcomes management. That's pretty much the story of all biology. Fat cells don't "run" the human body, distributed feedback does.

Cultural experience has consistently documented an unceasing need for MORE DISTRIBUTED & less constrained regulation of decision-making. Unleash more fiat.

Roger Erickson said...

Why should hoarders run human culture? They don't, except for brief periods when NeoLiberal Control Frauds get their way.

Roger Erickson said...

This actually paraphrases Warren's unique jargon:

"The liability side of [our entire culture] is not the place to enforce market discipline."

The regulatory side is.

Ralph Musgrave said...

Paul,

Private banks, which is what I assume you mean by non-FRBS banks, can’t create state money, but they CAN CREATE their own money. I.e. in effect J.P.Morgan / Citibank can print “JPM / Citibank dollar bills” which they lend out and promise to swap for Fed dollar bills whenever anyone wants. That’s done with book keeping entries rather than actually printing physical bills of course.

Re “funding growth”, privately created money can fund growth no problem in the sense that there’s no limit to the number of assets that private banks can monetise, where non-bank entities want more money. But the problem comes when money hoarding takes place. Then we get Keynes’s “paradox of thrift” unemployment, and the state has to step in and supply the cash that the private and/or foreign sector wants to hoard.

xan said...

Now this privilege that banks are given to have the credit they create interchangeable with the national credit seems to me to be a far too generous gift. I notice the Chinese banks are still 50% or more owned by the government, which gives them independence but does not give away all that has been created by the community in the form of a stable credit system. At least half the profits are going back to the gov't and the books are open to the public, since the public is the gov't, even if rhetorically. This happens at the provincial level as well in China, and not just with banks. But public ownership of banks is easier to justify since the value of their credit comes from gov't backing. Wells Fargo dollars that are not interchangeable with US dollars would be a questionable asset to hold. In the case of partial ownership, equity becomes the tax, and any tax that is or behaves like equity is, again, as far as I understand it, none or minimally distorting on the market. The 'taxes' are just a portion of the profits. This is why a land value tax is non-distorting; it mimics equity.

xan said...

Oops the first half of my comment got lost in the nethernet. will fill in later.

Roger Erickson said...

"Now this privilege that banks are given to have the credit they create interchangeable with the national credit seems to me to be a far too generous gift."

They're just hired, licensed accountants filling a necessary role.

Just regulate the damn accountants. We have tougher regs on mechanical engineers than on financial engineers. That's just dumb.

This is NOT rocket science.

Matt Franko said...

Roger, it is not rocket science TO YOU.... rsp