National debt
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National Debt

Summary
Johnson & Kwak argue that expanding the national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
provides a hedge against unforeseen future problems, as long as creditors are willing to continue lending.  They illustrate different approaches to managing the debt within the US is the United States of America.   over its history and of the eighteenth century administrations of England and France. 

The US embodies two different political and economic systems which approach the national debt differently:
Johnson & Kwak develop a model of what the US government does.  They argue that the conflicting sinking fund and low tax approaches leaves the nation 'stuck in the middle' with a future problem.  And they offer their list of 'first principles' to help assess the best approach for moving from 2012 into the future.  

They conclude the question is still political.  They hope it can be resolved with an awareness of their detailed explanations.  They ask who is willing to push all the coming risk onto individuals

Following our summary of their arguments RSS is Rob's Strategy Studio frames them from the perspective of complex adaptive system (CAS) theory.  Historically developing within the global cotton value delivery system, key CAS features are highlighted. 

White House Burning
In Simon Johnson & James Kwak's book 'White House Burning' they describe the competing political strategies for modeling and managing the US is the United States of America.   national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
since the initial revolutionary colonies to the present day.

In 1790 Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
secretary Hamilton proposed a fiscal transformation along British lines:
  • Restructuring the national debt
  • Federal takeover of state debts
  • A national bank
  • Excise taxes.
But small government, anti-tax oriented Thomas Jefferson and James Madison opposed Hamilton's centralized fiscal strategy.  Elected in 1802 they repealed the excise taxes and cut defense spending. 

By 1812 President James Madison proposed and Congress declared war on Great Britain.  But Madison and Jefferson had resisted setting up the mechanism to pay for the war.  The lack of funds limited the scope of investments in the army and navy.  Secretary Gallatin proposed increased taxes to cover the interest on the new debt.  Eventually Congress allowed tariffs and increased borrowing but not excise taxes.  Gallatin was forced to print money and obtain a private loan from Stephen Girard.  With the US is the United States of America.   hamstrung the British navy raided at will.  It attacked and took Washington and burned the Capitol, Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
building and White House. 

The military is only as strong as the economy funding it.  In 1812 Britain's economy and tax policies provided it with the ability to raise money to outfit hundreds of ships and fight multiple simultaneous wars.  In contrast because of its poor fiscal situation, due to the lack of a stable source of tax revenue, the US is the United States of America.   failed to attract lenders to fund its war plans. 

By 2011 the Obama administration needed to borrow to cope with a record budget deficit driven by the 2001 to 2003 tax cuts: EGTRRA is the economic growth and Tax relief Reconciliation Act of 2001.  It was the third-largest tax cut in modern history.  Combined with an economic slowdown including the 2000 Internet stocks' crash, and increased military spending, these revenue cuts removed the surplus by 2003. 
, JGTRRA is the jobs and growth tax relief reconciliation act of 2003.  It was an evolved amplifier for the Republican author's and their wealthy backers.  Congressional legislators were constrained by the ATR and the Club for Growth.  JGTRRA:
  • Lowered the tax on capital gains to a maximum of 15%
  • Lowered th tax on dividends to a maximum of 15%
  • Accelerated parts of EGTRRA.  It was argued to cost $350 billion if the proposed early phase-outs were implemented.  They were not.  Instead the cuts were extended by the TIPRA. 
, TIPRA is the tax increase prevention and reconciliation act of 2005.  It was an additional layer of strategy by Republican's extending the 2003 JGTRRA tax cuts through 2010.  ; and the 2008 financial crisis.  The debt ceiling provides Congress with a lever over the administration's spending plans.  In 2011 it was used to constrain the treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
's borrowing creating a cash flow crisis.  Some Congressional Republicans argued to push America into default.  The political discontent was over future spending demands:
  • The cost implications of an aging population
  • Retirement costs
  • Disability costs
  • Large and already growing health care costs. 
The Reagan 1981 tax cuts: ERTA is the economic recovery tax act (Kemp-Roth tax cut) of 1981 was President Reagan's huge tax cut reducing the marginal tax rates on high-income tax payers from 70 to 30%. 
; resulted in huge deficits, but there were no political consequences.  Dick Cheney concluded 'deficits don't matter.'  Many voters want the benefits of tax cuts but worry about the debt.  And many voters don't understand what the federal government does! 

After the 2008 financial crisis the national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
started to escalate.  By 2010 it was 62% of GDP is:
  • Gross domestic product which measures the total of goods and services produced in a given year within the borders of a given country according to Piketty.  GDP has many problems:
    • GDP is a poor measure of:
      • Value & wealth
      • Who gets what
    • GDP excludes:
      • Services by house makers
      • Leisure
    • GDP includes items that should be excluded:
      • Cost of waste - cleaning up pollution, building prisons, commuting to work;
  • Guanine-di-phosphate is a nucleotide base. 
.  And Social Security is the social securities act of 1935 was part of the second New Deal.  It attempted to limit risks of old age, poverty and unemployment.  It is funded through payroll taxes via FICA and SECA into the social security trust funds.  Title IV of the original SSA created what became the AFDC.  The Social Security Administration controls the OASI and DI trust funds.  The funds are administered by the trustees.  The SSA was amended in 1965 to include:
  • Title V is Maternal and child health services. 
  • Title XVIII is Medicare.  
and Medicare is a social insurance program that guarantees access to health insurance for Americans aged 65 and over, and younger people with disabilities and end stage renal disease or ALS.  Medicare includes:
  • Benefits
    • Part A: Hospital inpatient insurance.  As of Dec 2013 Medicare pays for home care in only limited circumstances, such as when a person needs temporary nursing care after a hospitalization.  Part A covers 20 days of inpatient rehabilitation at a SNF after discharge from inpatient care at a hosptial. 
    • Part B: Medical insurance
    • Part C: Medicare Advantage 
    • Part D: Prescription drug coverage 
  • Eligibility
    • All persons 65 years of age or older who are legal residents for at least 5 years.  If they or a spouse have paid Medicare taxes for 10 years the Medicare part A payments are waived. 
    • Persons under 65 with disabilities who receive SSDI. 
    • Persons with specific medical conditions:
      • Have end stage renal disease or need a kidney transplant. 
      • They have ALS. 
    • Some beneficiaries are dual eligible. 
    • Part A requires the person has been admitted as an inpatient at a hospital.  This is constrained by a rule that they stay for three days after admission.  
  • Premiums
    • Part A premium
    • Part B insurance premium
    • Part C & D premiums are set by the commercial insurer. 
will become a huge additional burden by 2020. 

As the debt grows the annual interest payments grow.  Eventually the situation could result in a loss of trust and distrust are evolved responses to sham emotions.  During a friendship where no sham emotions have been detected trust will build up. 
by major creditors and investors, as previously occurred in 1813

Immortal credit
In 1789 Washington's government had defaulted on interest and principle repayments to France.  It was struggling with the costs of the war of independence:
  • Because it had no ability or infrastructure to collect taxes and
  • It had no credit that would allow it to borrow.  
    • The French, as Britain's enemy, along with Spain and Holland, provided loans.  
    • It needed a viable economy and demonstrable capability to defend itself, to gain access to the credit markets. 
  • It used printed money to make some payments. 
UK is the United Kingdom of Great Britain and Northern Ireland. 
was the country that was most attractive to the credit markets.  Because the UK had:
18th century France, in contrast, was in a constant fiscal crisis:
Laying the foundations
Hamilton responded to the Federalist Washington led government's default by demanding for order in the finances to restore public credit worthiness.  Meanwhile the States and the Democratic-Republican Party were following the French framework.  Democratic-Republican leaders aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
, Jefferson and Madison, did not want the Federal government to have the authority to tax.  They aimed to sustain the plantation economies of the South.  Hamilton, a Federalist, argued the US is the United States of America.   must be able to attract loans in times of threat.  Using the British framework as a model Hamilton proposed a debt swap:
  • Old creditors including speculators were to be paid.  
  • New treasury bills released
    • 3% and 6% bonds with interest paid for with tax revenue from whiskey production, penalizing the western states and catalyzing the whiskey rebellion which had to be put down by Washington's militia.  
  • National bank chartered to stand behind the bonds.  
    • Investors in the Bank of the United States were required to pay for some of their shares with government bonds. 
  • Jefferson and Madison agreed to the plan in exchange for the new federal capital being located on the Potomac in Virginia. 
  • The successful outcome brought the US budget into balance.  By 1791 the yield on government debt stabilized at 8% which European investors liked.  As the credit infrastructure started to work it stimulated the US economy.  

All together now
During Jefferson and Madison's presidencies the Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
Secretary was Albert Gallatin a founder of the House Ways and Means committee.  The Democratic-Republicans moved to overturn the Federalist financial infrastructure.  They cut taxes and spending on defense.  Gallatin abandoned the use of national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
.  However, the opportunity to purchase Louisiana from France and fight the UK in 1812 pushed the country deep into debt.  Clay and Calhoun resisted increasing taxes as spending escalated.  The country could not borrow enough to resource the war. 

Hamilton's logic had been clearly demonstrated. 

Stress test
The civil war created spending and debt on both sides. The:
After the war, the Government used taxes to pay down the debt.  And Chase's Currency Act allowed the government to leverage banks further to borrow.  The new laws allowed the government to issue standardized legal tender.  These greenbacks were initially convertable into Treasury bonds but later did not offer any convertability.  A Congressional tax on state currencies rapidly removed these from curculation.  Industrialists wanted import tariffs which asymmetrically impacted the poor, the South and West.  The Government ran a budget surplus.  This cash and low cost land, immigration, industrialization including: Telecommunications, Railways, Electric power;
This page discusses the effect of the network on the agents participating in a complex adaptive system (CAS).  Small world and scale free networks are considered. 
networks
helped generate the World's largest economy by 1870.  But they also started to add costs and constraints: Regulations, Public infrastructure: Railways, Public health is the proactive planning, coordination and execution of strategies to improve and safeguard the wellbeing of the public.  Its global situation is discussed in The Great Escape by Deaton.  Public health in the US is coordinated by the PHS federally but is mainly executed at the state and local levels.  Public health includes:
  • Awareness campaigns about health threatening activities including: Smoking, Over-eating, Alcohol consumption, Contamination with poisons, Joint damage from over-exercise;
  • Research, monitoring and control of disease agents, processes and vectors by agencies including the CDC. 
  • Monitoring of the public's health by institutes including the NIH.  
  • Development, deployment and maintenance of infrastructure including: sewers, water plants and pipes.  
  • Development, deployment and maintenance of vaccination strategies. 
  • Regulation and constraint of foods, drugs and devices by agencies including the FDA. 
,
The complexity and problems of the US Health network is described in terms of complex adaptive system (CAS) theory. 

The network:
  • Is deeply embedded in the US nation state. It reflects the conflict between two opposing visions for the US.  The emergence of a parasitic elite further constrains the choices available to improve the efficiency and effectiveness of the network. 
  • Is incented to focus on localized competition generating massive & costly duplication of services within physician based health care operations instead of proven public health strategies.  This process drives increasing research & treatment complexity and promotes hope for each new technological breakthrough. 
  • Is amplified by the legislatively structured separation and indirection of service development, provision, reimbursement and payment. 
  • Is impacted by the different political strategies for managing the increasing cost of health care for the demographic bulge of retirees.  
  • Is presented with acute and chronic problems to respond to.  As currently setup the network is tuned to handle acute problems.  The interactions with patients tend to be transactional. 
  • Includes a legislated health insurance infrastructure which is:
    • Costly and inefficient
    • Structured around yearly contracts which undermine long-term health goals and strategies.  
  • Is supported by increasingly regulated HCIT which offers to improve data sharing and quality but has entrenched commercial EHR products deep within the hospital systems. 
Health care
.  But economic growth and expanding international trade allowed the Government to collect enough taxes to finance the debt. 

Paying for total war
During 1913 the US is the United States of America.  :
With these changes the US was able to finance its costs during the first total war from 1914 to 1918.  But the international consequences of the First World War caused many economies, including the US, to collapse, resulting in FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's response with the New Deal adding: The additional commitment of Social Security is the social securities act of 1935 was part of the second New Deal.  It attempted to limit risks of old age, poverty and unemployment.  It is funded through payroll taxes via FICA and SECA into the social security trust funds.  Title IV of the original SSA created what became the AFDC.  The Social Security Administration controls the OASI and DI trust funds.  The funds are administered by the trustees.  The SSA was amended in 1965 to include:
  • Title V is Maternal and child health services. 
  • Title XVIII is Medicare.  
, Restarting the US economy with Keynesian debt financing; and in response to the Second World War, the
Ed Conway argues that Bretton Woods produced a unique set of rules and infrastructure for supporting the global economy.  It was enabled by the experience of Keynes and White during and after the First World War, their dislike of the Gold Standard, the necessity of improving the situation between the wars and the opportunity created by the catastrophe of the Second World War. 

He describes how it was planned and developed.  How it emerged from the summit.  And he shows how the opportunity inevitably allowed the US to replace the UK at the center of the global economy. 

Like all plans there are mistakes and Conway takes us through them and how the US recovered the situation as best it could. 

And then Conway describes the period after Bretton Woods collapsed.  He explains what followed and also compares the relative performance of the various periods before during and after Bretton Woods. 

Following our summary of his arguments RSS comments from the perspective of Complex Adaptive System (CAS) theory.  Conway's book illustrates the rule making and infrastructure that together build an evolved amplifier.  He shows the strategies at play of agents that were for and against the development and deployment of the system.  And The Summit provides a key piece of the history of our global economic CAS. 

Bretton Woods
infrastructure including the IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
and World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and provide reconstruction and development resources for projects in developing economies.
.  President Truman then added Marshall Plan funding which finally reinvigorated Europe and Japan. 

End of gold
With the redesign of the global economic system in 1944 at
Ed Conway argues that Bretton Woods produced a unique set of rules and infrastructure for supporting the global economy.  It was enabled by the experience of Keynes and White during and after the First World War, their dislike of the Gold Standard, the necessity of improving the situation between the wars and the opportunity created by the catastrophe of the Second World War. 

He describes how it was planned and developed.  How it emerged from the summit.  And he shows how the opportunity inevitably allowed the US to replace the UK at the center of the global economy. 

Like all plans there are mistakes and Conway takes us through them and how the US recovered the situation as best it could. 

And then Conway describes the period after Bretton Woods collapsed.  He explains what followed and also compares the relative performance of the various periods before during and after Bretton Woods. 

Following our summary of his arguments RSS comments from the perspective of Complex Adaptive System (CAS) theory.  Conway's book illustrates the rule making and infrastructure that together build an evolved amplifier.  He shows the strategies at play of agents that were for and against the development and deployment of the system.  And The Summit provides a key piece of the history of our global economic CAS. 

Bretton Woods
the US is the United States of America.   ensured it would become the world's predominant economic power.  It pulled new countries into the global trade network.  But the Bretton Woods system collapsed in the 1970s due to unsustainable trade and capital flows, with Nixon's abandonment of the gold standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 

The result was the ascendency of the dollar, providing the US with a huge international line of credit.  That offered the US government the opportunity to massively increase the national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 


Conversely under 18th century British rule, the original 13 colonies had suffered from the limited quantity of available currency causing deflation and limiting growth.  Benjamin Franklin, a printer by trade, had promoted printed money to allow the expansion of the Pennsylvanian economy but the British outlawed the practice in 1751 encouraging deflation and cash flow crisis.  The revolutionary Congress used paper money to pay the Continental Army.  But only the states could tax to generate revenue.  Congress continued printing money to pay its debts causing inflation of the paper currency relative to gold and silver. 

Hamilton had to fix an inflated currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
.  He proposed a dual gold and silver coinage.  His recommendations were implemented in the Mint Act of 1792 made the US dollar the currency, made the currency decimal, established the US Mint, and regulated coinage. 
.  Gold and silver dollar alignment with the growing economy was supported by the additional gold found in the California gold rush.  Both the currency and the debt that support it depend on the holder's belief in the government's solvency.  To maintain international flows of shipped goods the US needed the credit of private banks. 

Bank runs
The extension of credit implies a risk to the bank's account holders.  After a series of runs that caused the failure of sound banks and the ruin of their account holders, the huge 1907 panic caused the government to act.  In response the Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses.  It setup:
  • At least 8 and not more than 12 private regional Federal Reserve banks.  Twelve were setup
  • Federal Reserve Board with seven members to govern the system.  The President appointed the seven, which must be confirmed by Congress.  In 1935 the Board was renamed and restructured. 
  • Federal Advisory Committee with twelve members
  • Single US currency - the Federal Reserve Note. 
System was introduced, backing up the state banks with a central lender during any crisis.  But the mechanism depends on the good credit of the federal government.  Banks need to own safe liquid assets they can sell quickly if they need cash.  A credit worthy government's bonds serve as this liquid interest bearing reserve.  And the government obtains access to the deposits.  Hamilton's actions ensured the US government was credit worthy making Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
bonds a safe asset.  Chase's national currency and bank acts supported the process with a standardized greenback and federal banking network. 

The US went back onto the gold standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
when the greenback was made convertible to specie in 1879.  This facilitated international trade. 

During the First World War the gold standard was abandoned, but the UK and US adopted it again after the war, and other European trading nations followed by 1928. 

By 1929 a US stock market bubble burst, and markets around the world collapsed, leading to the Great Depression: President Hoover and Secretary Mellon moved to protect the gold base by raising interest rates, The gold standard then drove the US action across to its trading partners; 

Amidst a nationwide panic FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
was elected president in 1933 and:
In 1934 FDR reset the dollar gold exchange rate to $35 to an ounce of gold which stimulated inflation. 

Dollar triumphant: 1944--1971
Ed Conway argues that Bretton Woods produced a unique set of rules and infrastructure for supporting the global economy.  It was enabled by the experience of Keynes and White during and after the First World War, their dislike of the Gold Standard, the necessity of improving the situation between the wars and the opportunity created by the catastrophe of the Second World War. 

He describes how it was planned and developed.  How it emerged from the summit.  And he shows how the opportunity inevitably allowed the US to replace the UK at the center of the global economy. 

Like all plans there are mistakes and Conway takes us through them and how the US recovered the situation as best it could. 

And then Conway describes the period after Bretton Woods collapsed.  He explains what followed and also compares the relative performance of the various periods before during and after Bretton Woods. 

Following our summary of his arguments RSS comments from the perspective of Complex Adaptive System (CAS) theory.  Conway's book illustrates the rule making and infrastructure that together build an evolved amplifier.  He shows the strategies at play of agents that were for and against the development and deployment of the system.  And The Summit provides a key piece of the history of our global economic CAS. 

Bretton Wood
's involved Keynes's and White's competing plans.  The US chose White's plan.  Johnson and Kwak assert it was the economic component of US is the United States of America.   hegemony.  US investment and lending supplied dollars overseas.  But this meant the US could use the system to finance deficits.  The $17 billion in Marshall Plan funding to Japan and Europe increased their exports to the US paid for in dollars. 

The Kennedy and Johnson is President Lyndon Baines Johnson.   administrations' high cost: social programs, wars, tax cuts; leveraged this financing resulting in an increasingly large national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
.  Even as Japan and Germany converted some of their growing dollar holdings for US gold reserves, to protect against dollar to gold exchange rate changes, the US government allowed the dollar and gold outflows to continue to sustain the domestic economy - the Triffin Dilemma is the economic conflict between short-term domestic goals and long-term international goals experienced by a country with a global reserve currency.  Bancor was Keynes's international currency designed to avoid the dilemma. 
.  During the presidency of Richard Nixon the impact of the gold standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
became unsustainable

Debt without limit: 1971--
Floating exchange rates made the dollar the reserve currency maintained in central bank reserves.  The oil and indexing based inflations of the 1970s were controlled by Volcker in 1979. 

By 1981 Reagan reduced the top rates of tax from 70% to 50% with the ERTA is the economic recovery tax act (Kemp-Roth tax cut) of 1981 was President Reagan's huge tax cut reducing the marginal tax rates on high-income tax payers from 70 to 30%. 
.  His increased defense spending and lower tax revenues ensured a recession generated huge deficits.  Congress responded with the Gramm-Rudman-Hollings balanced budget amendment but it had no teeth and deficits continued to expand the national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
.  Still the international demand for dollars and relatively balanced budgets of Presidents' George H. W. Bush and Bill Clinton, who both raised taxes and cut spending, left other countries viewing the dollar as a most attractive safe store of value.  Especially when with globalized capital flows Asia blew up: Thailand,
Satyajit Das uses an Indonesian company's derivative trades to introduce us to the workings of the international derivatives system.  Das describes the components of the value delivery system and the key transactions.  He demonstrates how the system interacted with emerging economies expanding them, extracting profits and then moving on as the induced bubbles burst.  Following Das's key points the complex adaptive system (CAS) aspects are highlighted. 
Indonesia
, South Korea; required IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
loans.  But the onerous conditions attached to the IMF loans led trading nations to try and avoid dependence on the IMF.  Instead major traders like China built large dollar surpluses.  And this process also kept their currencies is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
cheap. 

By 2011 seven trillion dollars was held by the IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
and sovereign funds.  And the US was treated as a safe haven for funds, even after the
A key agent in the 1990 - 2008 housing expansion Countrywide is linked into the residential mortgage value delivery system (VDS) by Paul Muolo and Mathew Padilla.  But they show the VDS was full of amplifiers and control points.  With no one incented to apply the brakes the bubble grew and burst.  Following the summary of Muolo and Padilla's key points the complex adaptive system (CAS) aspects are highlighted. 
2008 financial crisis
and the US is the United States of America.   had built a $10.1 trillion national debt! 

Deficits don't matter
President Reagan's ERTA is the economic recovery tax act (Kemp-Roth tax cut) of 1981 was President Reagan's huge tax cut reducing the marginal tax rates on high-income tax payers from 70 to 30%. 
1981 tax cuts and high federal spending resulted in a record peace-time deficit of 5% of GDP is:
  • Gross domestic product which measures the total of goods and services produced in a given year within the borders of a given country according to Piketty.  GDP has many problems:
    • GDP is a poor measure of:
      • Value & wealth
      • Who gets what
    • GDP excludes:
      • Services by house makers
      • Leisure
    • GDP includes items that should be excluded:
      • Cost of waste - cleaning up pollution, building prisons, commuting to work;
  • Guanine-di-phosphate is a nucleotide base. 
.  In 1992 it was argued that deficits put the US at risk of becoming a second class nation.  But by 2000 President Clinton had the largest budget surplus in 50 years.  He prioritized a balanced budget as more important than social programs and benefited from the post-cold-war peace dividend. 

By 2008
Barton Gellman details the strategies used by Vice President Cheney to align the global system with his economics, defense, and energy goals. 
Vice President Dick Cheney
argued "Reagan proved that deficits don't matter."  And massive deficits were generated by president George W. Bush's huge: EGTRRA is the economic growth and Tax relief Reconciliation Act of 2001.  It was the third-largest tax cut in modern history.  Combined with an economic slowdown including the 2000 Internet stocks' crash, and increased military spending, these revenue cuts removed the surplus by 2003. 
, JGTRRA is the jobs and growth tax relief reconciliation act of 2003.  It was an evolved amplifier for the Republican author's and their wealthy backers.  Congressional legislators were constrained by the ATR and the Club for Growth.  JGTRRA:
  • Lowered the tax on capital gains to a maximum of 15%
  • Lowered th tax on dividends to a maximum of 15%
  • Accelerated parts of EGTRRA.  It was argued to cost $350 billion if the proposed early phase-outs were implemented.  They were not.  Instead the cuts were extended by the TIPRA. 
, TIPRA is the tax increase prevention and reconciliation act of 2005.  It was an additional layer of strategy by Republican's extending the 2003 JGTRRA tax cuts through 2010.  ; tax cuts and high spending on two wars.  Additionally the retirement of the baby boomers increased costs from prior democratic commitments.  Johnson & Kwak argue the US is the United States of America.   fiscal situation shifted from that of 18 century UK is the United Kingdom of Great Britain and Northern Ireland. 
to 18th century France. 

The long march of tax revolt
Johnson & Kwak assert that low tax policies had little influence in the conservative party before Goldwater.  And Nixon was not interested.  They note he initiated expensive federal agencies: OSHA is the occupational safety and health administration, the main federal agency charged with developing rules and carrying out enforcement of safety and health legislation driven by the OSH act of 1970.   and the EPA is the Environmental Protection Agency of the Federal government. 
.  But the impact of: Civil rights, 1960 counter culture, Women's liberation, Welfare & regulatory expansion; induced a backlash from the right.  The Reagan revolution was seen as fighting the dominant liberal elite who were threatening basic freedoms.  The important Reagan themes included:
  • Evangelical Christianity
  • Economic and philosophical libertarianism
  • Pro-business antipathy to regulation
  • National security hawks
  • Anti-crime and for law & order
  • Tax revolt against the 1951 top rate of 91%
California adopts proposition 13.  Arthur Laffer promotes supply-side economics emphasizes policy measures which affect aggregate supply.  It is a model associated with Arthur Laffer.  Tax cuts are a classical policy measure which the model predicts raises total output by motivating people to work, save and invest more.  The evidence collected after use of these policies undermines these arguments. 
.  The Wall Street Journal's Jude Wanniski reported tax cuts cure economic and social problems: drug abuse and divorce. 

BY 1978 the RNC is the Republican National Committee, the national leadership of the US Republican party. 
endorses low taxes.  But the Congressional republicans are led by Bob Dole who is still keen to balance the federal budget.  It is only with the next generation of Republican Congressional leaders aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
, led by Newt Gingrich's GOPAC is a GOP training 527 organization, founded by Pierre du Pont, Governor of Delaware in 1979.  It was leveraged by radical Republican Newt Gingrich to educate a new set of GOP activists.   educated radicals including John Boehner, that there is alignment with Reagan's tax ideas. 

Gingrich fought any proposal to raise taxes.  That included resisting George H. W. Bush's 1990 OBRA is the Omnibus Budget Reconciliation act of 1990.  President George H. W. Bush used it to introduce a tax increase.  It was faught by Newt Gingrich's conservative Republicans. 
which still reduced the deficit by inclusion of:
The battle undermined Bush and in Johnson & Kwak's view indicated that power in the Republican Party had shifted to the anti-tax radicals. 

Bill Clinton's 1992 presidency and the Democratic control of Congress increased Gingrich's power through easier positioning of big government being Democratic error.  Clinton reduced deficits to minimize the levels of bond interest being paid.  He used tax increases, spending cuts due to defense cuts from the ending of the cold war, and the 1993 OBRA is the Omnibus Budget Reconciliation act of 1993.  President Clinton used it to reduce deficits by $433 billion over five years through:
  • Tax increases
  • Spending cuts.  Newt Gingrich's conservative Republicans all voted against the measure.   
to drive down deficits by $433 billion over five years.   Then in 1994 the Republican's congressional victory additionally empowered Gingrich, who aimed to use congressional control to role back welfare spending. 

The 1995 budget war introduced the possibility of federal default from Republican balanced budgets being vetoed by Clinton.  The war resulted in a government shutdown.  While the Republicans backed down, allowing increased spending to proceed, Gingrich increased his power over the party with Dick Armey as leader aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
and Tom Delay as whip.  Delay and Grover Norquist developed the K Street project traded access to the Republican leadership which controlled the House for: Top positions for Republicans at lobbying firms and Donations skewed to the Republican party.  It setup in 1995 by Grover Norquist and Tom Delay. 
which was used for control of funding to keep the party radical. 


Tax cuts implied reductions in public spending or expanding deficits.  Shrinking government was Norquist's goal.  He developed the Taxpayer Protection Pledge integrates a:
  • Signal that advertises the presence of the doomsday machine
  • Machine that once started can't be stopped.  
  • Uncontrollable initiation of the machine based on some constraint. 
  • Catastrophic result for all parties once the machine is started.  There is the potential for both parties to participate in an arms race. 
, and over time enforced Republican candidates committing to it.  He and Gingrich's radicals used Wednesday morning meetings between: strategists, conservative leaders and lobbyists to develop strategy.  Norquist pushed the candidacy of George W. Bush.  And President George W. Bush sent representatives to the meetings. 

Norquist is in a small group of 'anti-tax' Republicans who maintain leadership by rewarding loyalists and punishing dissent.  Johnson & Kwak explain the group leverages alliances from key conservative constituencies.  And its anti-tax small government message is very popular with the grass roots of the conservative movement.  Because Norquist's allies have spent forty years educating them to believe that the federal government is too big, too wasteful, and threatens personal freedoms.  The strategy includes:
Johnson & Kwak assert that Norquist's achievement was to fully align these conservative groups so the base, beliefs and messages constrain Republican politicians.  He fixed Reagan's ambivalent Congress.  By 1995 Gingrich, Armey, Delay and Norquist can push for tax cuts over deficit management in Congress.  They just needed a like-minded President. 

During his election campaign George W. Bush argued that surpluses should be given back to the people.  Once elected but with the economy weakening tax cuts were repositioned as an economic stimulus.  He implemented the radical agenda with: EGTRRA is the economic growth and Tax relief Reconciliation Act of 2001.  It was the third-largest tax cut in modern history.  Combined with an economic slowdown including the 2000 Internet stocks' crash, and increased military spending, these revenue cuts removed the surplus by 2003. 
- the third biggest tax cut in modern times, JGTRRA is the jobs and growth tax relief reconciliation act of 2003.  It was an evolved amplifier for the Republican author's and their wealthy backers.  Congressional legislators were constrained by the ATR and the Club for Growth.  JGTRRA:
  • Lowered the tax on capital gains to a maximum of 15%
  • Lowered th tax on dividends to a maximum of 15%
  • Accelerated parts of EGTRRA.  It was argued to cost $350 billion if the proposed early phase-outs were implemented.  They were not.  Instead the cuts were extended by the TIPRA. 
, TIPRA is the tax increase prevention and reconciliation act of 2005.  It was an additional layer of strategy by Republican's extending the 2003 JGTRRA tax cuts through 2010.  ; ensuring massive tax cuts for the wealthy is schematically useful information and its equivalent, schematically useful energy, to paraphrase Beinhocker.  It is useful because an agent has schematic strategies that can utilize the information or energy to extend or leverage control of the cognitive niche.  
, increasing income inequality and huge public deficits ($270 billion added to the 2010 deficit) if the sunset provisions could be rescinded.  Additionally Bush's two wars cost $1 trillion and the 2008 financial crisis cost even more!

In line with Gingrich & Norquist's goal of loading debt onto government programs, in 2003 Congress and the Bush administration passed the MMA is the Medicare Modernization Act of 2003.  It includes Medicare part D the Medicare prescription drug benefit which constrains Medicare from negotiation its drug prices and created MAC and RAC.  IT was sponsored by Senator Bill Tauzin and implemented by Tom Scully. 
which added hugely to Medicare is a social insurance program that guarantees access to health insurance for Americans aged 65 and over, and younger people with disabilities and end stage renal disease or ALS.  Medicare includes:
  • Benefits
    • Part A: Hospital inpatient insurance.  As of Dec 2013 Medicare pays for home care in only limited circumstances, such as when a person needs temporary nursing care after a hospitalization.  Part A covers 20 days of inpatient rehabilitation at a SNF after discharge from inpatient care at a hosptial. 
    • Part B: Medical insurance
    • Part C: Medicare Advantage 
    • Part D: Prescription drug coverage 
  • Eligibility
    • All persons 65 years of age or older who are legal residents for at least 5 years.  If they or a spouse have paid Medicare taxes for 10 years the Medicare part A payments are waived. 
    • Persons under 65 with disabilities who receive SSDI. 
    • Persons with specific medical conditions:
      • Have end stage renal disease or need a kidney transplant. 
      • They have ALS. 
    • Some beneficiaries are dual eligible. 
    • Part A requires the person has been admitted as an inpatient at a hospital.  This is constrained by a rule that they stay for three days after admission.  
  • Premiums
    • Part A premium
    • Part B insurance premium
    • Part C & D premiums are set by the commercial insurer. 
's funding problems.  President Bush proposed a similar debt laden change to Social Security is the social securities act of 1935 was part of the second New Deal.  It attempted to limit risks of old age, poverty and unemployment.  It is funded through payroll taxes via FICA and SECA into the social security trust funds.  Title IV of the original SSA created what became the AFDC.  The Social Security Administration controls the OASI and DI trust funds.  The funds are administered by the trustees.  The SSA was amended in 1965 to include:
  • Title V is Maternal and child health services. 
  • Title XVIII is Medicare.  
but failed to gain broad agreement to get it passed.  Johnson & Kwak stress that the added burden of MMA was still manageable because foreign demand for dollars and a
Satyajit Das uses an Indonesian company's derivative trades to introduce us to the workings of the international derivatives system.  Das describes the components of the value delivery system and the key transactions.  He demonstrates how the system interacted with emerging economies expanding them, extracting profits and then moving on as the induced bubbles burst.  Following Das's key points the complex adaptive system (CAS) aspects are highlighted. 
derivative financed
,
A key agent in the 1990 - 2008 housing expansion Countrywide is linked into the residential mortgage value delivery system (VDS) by Paul Muolo and Mathew Padilla.  But they show the VDS was full of amplifiers and control points.  With no one incented to apply the brakes the bubble grew and burst.  Following the summary of Muolo and Padilla's key points the complex adaptive system (CAS) aspects are highlighted. 
housing
catalyzed, an infrastructure amplifier.   economy were keeping the cost of funding US debt low. 

The net result of Bush administration policies was a shift from a projected $796 billion surplus to a $241 billion deficit, just as:

With the election of President Barack Obama and a Democratic Congress in 2008, Norquist became the de-facto Republican 'party leader aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
'. 

The Tea Party was a white Christian socially conservative grass roots organization with funding from Dick Armey and Conservative billionaires.  It reflected the backbone of Newt Gingrich's supporters. 
worked to gain influence over the Republican primary process.  They demanded: Limits on Federal government, lower spending and Lower taxes.  They were influential in the:

What Does the Federal Government Do?
In August 2011 Hurricane Irene hit the east coast of the US.  It was one of the most expensive storms on record.  And its path and impact had been clearly predicted by the Federal governments resources: NWS is National Weather Service , NHC is National Hurricane Center , NOAA is National Oceanic and Atmospheric Administration
; enabling response by state and FEMA is Federal Emergency Management Agency.  People are broadly in agreement that the government should provide effective emergency aid.  

Following this vision of a costly but valued government service Johnson & Kwak now develop a model of the broad range of activities the government provides with associated costs.  In 2010:
For Johnson & Kwak the model illustrates the optimal balance between private sector activity and government intervention can't be defined in purely dollar terms.  The total dollar level of government spending is a red herring. 

They explain the revenue the government captures to pay for the policies.  In 2010 the federal government collected $2.2 trillion in revenue from:

So in 2010 the federal government collected $2.2 trillion in revenue to fund $3.5 trillion (3.3 + 0.196) in spending, leaving a $1.3 trillion total deficit.  Johnson & Kwak acknowledge that the unusual overhangs of the 2008 financial crisis and 2009 stimulus overstate the immediate issue.  But they argue the aging demographics and increasing health care costs are significantly understated in the model. 

It is possible to cope with the deficit by:
Budgetary projections from the CBO include:
  • 10 year baseline
  • 25 yearlong term
  • But they are always wrong because:
    • Economic uncertainties (such as productivity) are impossible to model accurately
    • Political uncertainties (such as unpredicted policy shifts)
Still in 2010 Johnson & Kwak did not see reasons for a deficit crisis between 2012 and 2022, as long as the Bush tax cut sunset provisions execute.  But the aging population will:
This cost growth will increase the difficulty of balancing the budget.  Johnson & Kwak argue health care cost increases, catalyzed by technological innovation is the economic realization of invention and combinatorial exaptation. 
and rising incomes, will create a big, long term deficit problem:
  • 1/10 of the national economy in 1985
  • 1/6 of the economy in 2009
  • 1/4 of the economy in 2035.  They argue that these costs reflect real use by the citizens which will have to be paid by the government or the individuals themselves. 

Why Worry
Johnson & Kwak note the government is not like a family.  It is like a king: 
And even if the government was analogous to a family, or a company, they get long term loans and mortgages. 

It is argued by some critics that the government is broke.  But this ignores the realities that the government can:
  • Print money
  • Raise tax revenue
  • Restructure its debt - increasing the maturity dates or lowering the interest rates
  • Borrow more debt.  But if Congress refuse to raise the debt ceiling then the government will default.  
Some critics worry that their grandchildren will have to pay for our deficits:
  • The government actually borrows from people today who are interested in getting interest on their loans.  And the government can tax to obtain the revenue to pay the interest and the debt. 
  • The situation we leave for future generations really depends on what the government decides to do now with the revenue and loans it obtains:
    • It can consume its operating capital on pensions and health care. 
    • It can save by issuing bonds but these can be purchased by foreigners leaving a commitment in the future to pay the interest and capital back.  Johnson & Kwak note that commitments to foreign creditors approximately match commitments from foreigners to us. 
    • It can invest in infrastructure with the hope of improving the nation's productivity.  But what is the best way to do that?
Critics note that debt hurts economic growth.  Reinhardt & Rogoff suggested in a paper they could show this is true and the US is the United States of America.   is at risk.  But Johnson & Kwak argue it depends on the particular situation: 
  • In a recession, such as 2007 - 9, jobs are lost and consumption falls.  Stimulus is needed to reverse the economy, revive flows through the amplifiers and encourage hiring. 
  • At other times government bond buying will crowd out private buyers and increase the cost of money, resulting in higher costs for business. 
In the aftermath of the recession interest rates have not increased along with the increased deficits.  The low interest rates make it beneficial for the government to borrow. 

As deficits increase it is possible that the US will be unable to borrow more.  Greece after 2008 has this problem. 
The country was already spending more than it was telling the EU with the help of financial engineering from Goldman Sachs resulting in vast hidden debt.  In 2008 the European fiscal crisis, induced by the US housing crisis, lenders would not roll over Greek debt, forcing the country to seek an IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
loan or default.  Similar use of financial leverage caught Portugal, Ireland, Italy and Spain needing loans in 2008. 
But Greece is a poor model of the US situation.  Johnson & Kwak argue the US is the United States of America.   is special: 
There is some risk that if the central banks that invest in Treasury bonds decide the US is no longer particularly safe Treasury bond rates would rise unusually fast.  Johnson & Kwak assert that this point would probably be high relative to other countries.  They assume that someday China may take the place of the US as the safe haven but argue it will have to transform its political and economic frameworks first. 

Johnson & Kwak note that when there is another crisis, no one will see it coming.  They note that in 2007 Ireland had a debt of 12% of GDP is:
  • Gross domestic product which measures the total of goods and services produced in a given year within the borders of a given country according to Piketty.  GDP has many problems:
    • GDP is a poor measure of:
      • Value & wealth
      • Who gets what
    • GDP excludes:
      • Services by house makers
      • Leisure
    • GDP includes items that should be excluded:
      • Cost of waste - cleaning up pollution, building prisons, commuting to work;
  • Guanine-di-phosphate is a nucleotide base. 
.  But once the crisis hit it its debt expanded to 90% and Ireland needed an IMF loan.  Things can change fast. 

There are two problem scenarios:
  1. A major shock can cause a rapid increase in national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
    Dodd-Frank is the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.  Its titles include:
    1. Financial Stability creates the FSOC and OFR. 
    2. Orderly Liquidation Authority
      • Section 619 is the Volcker Rule: prohibitions on proprietary trading and certain relationships. 
    3. Transfer of Powers to the Comptroller, the FDIC, and the Fed
    4. Regulation of Advisers to Hedge Funds and Others - which updated the powers of the Investment Company Act. 
    5. Insurance
    6. Improvements to Regulation
    7. Wall Street Transparency and Accountability
    8. Payment, Clearing and Settlement Supervision
    9. Investor Protections and Improvements to the Regulation of Securities
    10. Bureau of Consumer Financial Protection
    11. Federal Reserve System Provisions
    12. Improving Access to Mainstream Financial Institutions
    13. Pay It Back Act
    14. Mortgage Reform and Anti-Predatory Lending Act
    15. Miscellaneous Provisions
    16. Section 1256 Contracts
    was intended to limit the scope of a further shock from the banking system.  But Johnson & Kwak note it left the largest financial agents intact while legislators have been working to weaken its provisions. 
  2. Responding to an unexpected event: War, Pandemic, Financial collapse, Terrorism; requires the fiscal space for Keynesian spending such as the: TARP is the troubled asset relief program.  It was a $700 billion bailout fund setup by Congress in 2008 to be dispersed by the Treasury.  The first special inspector general with oversight of TARP was Neil Barofsky. 
    program. 

Johnson & Kwak summarize the implications of the national debt to each of us:

Arguing First Principles
In 2011 President Obama signed a bill to increase the debt ceiling with only spending cuts included.  A super-committee of congressmen from both parties was asked to develop a deficit reduction plan.  But they failed to reach agreement. 

Johnson & Kwak argue to base a long term deficit reduction plan on core principles:
  • Promote long term economic growth
  • Expand scarce resources
  • Be fair - broadly share the benefits
  • Fix challenges that increase risks
  • Default must be an option - It should be avoided if possible. 
  • Shrinking the Feds role should be an option
  • Make the welfare state effective 
  • Align individual incentives effectively.  Johnson & Kwak assert that this is what makes capitalism work.  The invisible hand is actors interacting via the market. 
Modern economics aims to identify situations where free markets fail to produce socially beneficial outcomes.  Governments should adopt policies with social benefits and minimal side effects:


Where Do We Go from Here?
Johnson & Kwak ask what to do with the Bush tax cuts.  The sunset provisions were already delayed in 2010 until 2013.  They note the income and estate tax cuts mainly benefited the top 20%

President Obama proposes extending the Bush tax cuts up to $250,000.  The Republicans would push to extend them in full.  Johnson & Kwak assume the tax cuts will be extended.  But they advocate letting them expire, since they find no evidence of their policy benefit.  They would like to see an offsetting boost in short term spending but they doubt that could be achieved.  Still, allowing the tax cuts to expire will help with social security is the social securities act of 1935 was part of the second New Deal.  It attempted to limit risks of old age, poverty and unemployment.  It is funded through payroll taxes via FICA and SECA into the social security trust funds.  Title IV of the original SSA created what became the AFDC.  The Social Security Administration controls the OASI and DI trust funds.  The funds are administered by the trustees.  The SSA was amended in 1965 to include:
  • Title V is Maternal and child health services. 
  • Title XVIII is Medicare.  
and Medicare is a social insurance program that guarantees access to health insurance for Americans aged 65 and over, and younger people with disabilities and end stage renal disease or ALS.  Medicare includes:
  • Benefits
    • Part A: Hospital inpatient insurance.  As of Dec 2013 Medicare pays for home care in only limited circumstances, such as when a person needs temporary nursing care after a hospitalization.  Part A covers 20 days of inpatient rehabilitation at a SNF after discharge from inpatient care at a hosptial. 
    • Part B: Medical insurance
    • Part C: Medicare Advantage 
    • Part D: Prescription drug coverage 
  • Eligibility
    • All persons 65 years of age or older who are legal residents for at least 5 years.  If they or a spouse have paid Medicare taxes for 10 years the Medicare part A payments are waived. 
    • Persons under 65 with disabilities who receive SSDI. 
    • Persons with specific medical conditions:
      • Have end stage renal disease or need a kidney transplant. 
      • They have ALS. 
    • Some beneficiaries are dual eligible. 
    • Part A requires the person has been admitted as an inpatient at a hospital.  This is constrained by a rule that they stay for three days after admission.  
  • Premiums
    • Part A premium
    • Part B insurance premium
    • Part C & D premiums are set by the commercial insurer. 
trust fund replenishment. 

The retirement of the baby boomers will drive up the cost of social security increasing the deficits in 2030 by 1.3% of GDP is:
  • Gross domestic product which measures the total of goods and services produced in a given year within the borders of a given country according to Piketty.  GDP has many problems:
    • GDP is a poor measure of:
      • Value & wealth
      • Who gets what
    • GDP excludes:
      • Services by house makers
      • Leisure
    • GDP includes items that should be excluded:
      • Cost of waste - cleaning up pollution, building prisons, commuting to work;
  • Guanine-di-phosphate is a nucleotide base. 
.  George W. Bush proposed privatizing Social Security, with a 401K type plan, as a fix for the debt expansion.  This would remove the liabilities from the government.  But it just shifts the risk to the nation's individuals.  Instead Johnson & Kwak argue a full solution must either increase the tax base to pay for the deficit or reduce the amount spent with the deficit.  Johnson & Kwak propose four policy changes:
  1. Increase the cap on payroll taxes.  
    • The cap was set in 1983 at $106,800 (adjusted for inflation).  It covered 90% of all wage earnings.  Now 16% of earnings escape due to increased inequality.  So Johnson & Kwak argue to adjust it back to 90%
  2. Index the full benefit age to life expectancy. 
  3. Broaden the federal system to include all new hire state and local government employees.  
    • State finances are poor so Johnson & Kwak shift the cost of new hires to use federal financing.  
    • Today these state employees opt out.  With Johnson & Kwak's change they would be net contributors to federal revenues for many years. 
  4. Increase the payroll tax rate.  
    • They argue the benefit is already modest.  
Health care is costing 5.6% of GDP in 2010.  Without substantial changes it will be 10.3% by 2035.  Employers are stressed is a multi-faceted condition reflecting high cortisol levels.  Dr. Robert Sapolsky's studies of baboons indicate that stress helps build readiness for fight or flight.  As these actions occur the levels of cortisol return to the baseline rate.  A stressor is anything that disrupts the regular homeostatic balance.  The stress response is the array of neural and endocrine changes that occur to respond effectively to the crisis and reestablish homeostasis. 
  • The short term response to the stressor
    • activates the amygdala which: Stimulates the brain stem resulting in inhibition of the parasympathetic nervous system and activation of the sympathetic nervous system with the hormones epinephrine and norepinephrine deployed around the body, Activates the PVN which generates a cascade resulting in glucocorticoid secretion to: get energy to the muscles with increased blood pressure for a powerful response.  The brain's acuity and cognition are stimulated.  The immune system is stimulated with beta-endorphin and repair activities curtail.  But when the stressor is
  • long term: loneliness, debt; and no action is necessary, or possible, long term damage ensues.  Damage from such stress may only occur in specific situations: Nuclear families coping with parents moving in.  Sustained stress provides an evolved amplifier of a position of dominance and status.  It is a strategy in female aggression used to limit reproductive competition.  Sustained stress:
    • Stops the frontal cortex from ensuring we do the harder thing, instead substituting amplification of the individual's propensity for risk-taking and impairing risk assessment! 
    • Activates the integration between the thalamus and amygdala. 
      • Acts differently on the amygdala in comparison to the frontal cortex and hippocampus: Stress strengthens the integration between the Amygdala and the hippocampus, making the hippocampus fearful. 
      • BLA & BNST respond with increased BDNF levels and expanded dendrites persistently increasing anxiety and fear conditioning. 
    • Makes it easier to learn a fear association and to consolidate it into long-term memory.  Sustained stress makes it harder to unlearn fear by making the prefrontal cortex inhibit the BLA from learning to break the fear association and weakening the prefrontal cortex's hold over the amygdala.  And glucocorticoids decrease activation of the medial prefrontal cortex during processing of emotional faces.  Accuracy of assessing emotions from faces suffers.  A terrified rat generating lots of glucocorticoids will cause dendrites in the hippocampus to atrophy but when it generates the same amount from excitement of running on a wheel the dendrites expand.  The activation of the amygdala seems to determine how the hippocampus responds. 
    • Depletes the nucleus accumbens of dopamine biasing rats toward social subordination and biasing humans toward depression. 
    • Disrupts working memory by amplifying norepinephrine signalling in the prefrontal cortex and amygdala to prefrontal cortex signalling until they become destructive.  It also desynchronizes activation in different frontal lobe regions impacting shifting of attention. 
  • During depression, stress inhibits dopamine signalling. 
  • Strategies for stress reduction include: Mindfulness. 
by the cost of health care benefits.  Families are still at risk of bankrupting medical emergencies.  Illness contributes to 50%  of all bankruptcies and in three quarters of these cases the families had health insurance.  Johnson & Kwak propose two fixes:
  1. Reduce the cost of health care.  Johnson & Kwak see the present inefficiency of US health care as offering potential for cost reduction:
  2. Reduce the government share of spending on health care.  
National defense is $689 billion in 2010 (4.7% of GDP is:
  • Gross domestic product which measures the total of goods and services produced in a given year within the borders of a given country according to Piketty.  GDP has many problems:
    • GDP is a poor measure of:
      • Value & wealth
      • Who gets what
    • GDP excludes:
      • Services by house makers
      • Leisure
    • GDP includes items that should be excluded:
      • Cost of waste - cleaning up pollution, building prisons, commuting to work;
  • Guanine-di-phosphate is a nucleotide base. 
).  This cost is likely to reduce due to the 2011 budget control act. 

Energy: Johnson & Kwak propose a carbon tax to reduce distortions of fossil fuels.  The issue with such a tax is it is regressive.  So Johnson & Kwak propose to offset it with an income tax cut or rebates to poor families. 

Finance: Johnson & Kwak argue it was the losses generated by the financial crisis that forced the development of a fix to fund $50 billion of GDP is:
  • Gross domestic product which measures the total of goods and services produced in a given year within the borders of a given country according to Piketty.  GDP has many problems:
    • GDP is a poor measure of:
      • Value & wealth
      • Who gets what
    • GDP excludes:
      • Services by house makers
      • Leisure
    • GDP includes items that should be excluded:
      • Cost of waste - cleaning up pollution, building prisons, commuting to work;
  • Guanine-di-phosphate is a nucleotide base. 
!  They advocate policies that reduce risk and protect the tax payers:
  • Reduce institutional size
  • Improve incentives with a fee on large institutions to fund future rescues and a fee on leveraged institutions. 
  • Financial activities tax on high profits and compensation. 
Small items:
Tax expenditures: induce a variety of revenue reducing distortions. 


Conclusion

Johnson and Kwak suggest America must choose:
Johnson and Kwak want:
As globalization has outsourced jobs, health care has become ruinously expensive and 401(k) based pensions lost value in the financial crisis, government programs including Social Security is the social securities act of 1935 was part of the second New Deal.  It attempted to limit risks of old age, poverty and unemployment.  It is funded through payroll taxes via FICA and SECA into the social security trust funds.  Title IV of the original SSA created what became the AFDC.  The Social Security Administration controls the OASI and DI trust funds.  The funds are administered by the trustees.  The SSA was amended in 1965 to include:
  • Title V is Maternal and child health services. 
  • Title XVIII is Medicare.  
, Medicare is a social insurance program that guarantees access to health insurance for Americans aged 65 and over, and younger people with disabilities and end stage renal disease or ALS.  Medicare includes:
  • Benefits
    • Part A: Hospital inpatient insurance.  As of Dec 2013 Medicare pays for home care in only limited circumstances, such as when a person needs temporary nursing care after a hospitalization.  Part A covers 20 days of inpatient rehabilitation at a SNF after discharge from inpatient care at a hosptial. 
    • Part B: Medical insurance
    • Part C: Medicare Advantage 
    • Part D: Prescription drug coverage 
  • Eligibility
    • All persons 65 years of age or older who are legal residents for at least 5 years.  If they or a spouse have paid Medicare taxes for 10 years the Medicare part A payments are waived. 
    • Persons under 65 with disabilities who receive SSDI. 
    • Persons with specific medical conditions:
      • Have end stage renal disease or need a kidney transplant. 
      • They have ALS. 
    • Some beneficiaries are dual eligible. 
    • Part A requires the person has been admitted as an inpatient at a hospital.  This is constrained by a rule that they stay for three days after admission.  
  • Premiums
    • Part A premium
    • Part B insurance premium
    • Part C & D premiums are set by the commercial insurer. 
and unemployment insurance became more broadly needed.  But many current strategies are moving towards a high risk solution. 
The current large debt and deficits have been used to justify dismantling the government provided safety nets. 

Johnson and Kwak conclude the debt problem can be solved by:
  • Having a clear vision of government and selecting choices to match the desired outcome. 
  • Accepting that we should pool money for the future and decide how to use it. 
They hope that political deadlock is due to Americans being confused about the: Budget, Causes of the deficit, Link between them and the government; so that an effective understanding of the debt will support a better political outcome.   

Johnson and Kwak argue that the debate over the national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
really boils down to the question - Are you willing to face risks alone or do you want society to help? 







This page introduces the complex adaptive system (CAS) theory frame.  The theory is positioned relative to the natural sciences.  It catalogs the laws and strategies which underpin the operation of systems that are based on the interaction of emergent agents. 
John Holland's framework for representing complexity is outlined.  Links to other key aspects of CAS theory discussed at the site are presented. 
CAS theory
views the USA as controlling a global economic network of nation state actors.   The position may be transient due to the scale and scope of the interconnected Chinese economy.  Internally the US economic network and politics reflect its early history as both a supplier of trade goods and a manufacturing competitor to other advanced nations.  The ascendancy of the US as the preeminent super power allowed the political elite to focus on competing for control of the US rather than worrying about external existential threats.  But there are still external threats: War, Climate change, Pandemics, Lack of water, Terrorism; and the aging of the baby boomers presents difficult problems too.  When these become pressing they are sure to alter the debate once again. 

The political judgement about what type of country the US should be still divides the nation.  It seems unlikely that it will be resolved soon.  Instead it may be more pragmatic to accept the legitimacy of the conflict and identify what can be done to mitigate additional risk. 



We now comment on Johnson & Kwak's detailed discussion items from the perspective of CAS theory. 

The scenario of growing debt burden is already facing many US states and Puerto Rico (Jun 2016). 

The UK political elite designed an
This page reviews the strategy of setting up an arms race.  At its core this strategy depends on being able to alter, or take advantage of an alteration in, the genome or equivalent.  The situation is illustrated with examples from biology, high tech and politics. 
evolved amplifier
that leveraged the wealth is schematically useful information and its equivalent, schematically useful energy, to paraphrase Beinhocker.  It is useful because an agent has schematic strategies that can utilize the information or energy to extend or leverage control of the cognitive niche.  
being created and captured from its global trading network to provide credit to the government, which was then repaid with interest from broadly collected taxes. 

The outsourced tax collection processes of the Ancien Regime were
This page reviews the strategy of setting up an arms race.  At its core this strategy depends on being able to alter, or take advantage of an alteration in, the genome or equivalent.  The situation is illustrated with examples from biology, high tech and politics. 
leveraged
by
David Bodanis illustrates how disruptive effects can take hold.  While the French revolution had many driving forces including famine and oppression the emergence of a new philosophical vision ensured that thoughtful leaders were constrained and conflicted in their responses to the crisis. 
du Chatelet
to escape her personal debt and build independence from the monarchy. 

An
Kevin Kruse argues that from 1930 onwards the corporate elite and the Republican party have developed and relentlessly executed strategies to undermine Franklin Roosevelt and the New Deal.  Their successful strategy used the credibility of conservative religious leaders to:
  • Demonstrate religious issues with the New Deal. 
  • Integrate the corporate elite and evangelicals. 
  • Use the power of corporate advertising and Hollywood to reeducate the American people to view the US as historically religious and the New Deal and liberalism as anti-religious socialism. 
  • Focus the message through evangelicals including Vereide and Graham. 
  • Centralize the strategy through President Eisenhower. 
  • Add religious elements to mainstream American symbols: money, pledge;
  • Push for prayer in public school
  • Push Congress to promote prayer
  • Make elections more about religious positions. 

Following our summary of his arguments RSS frames them from the perspective of complex adaptive system (CAS) theory.  Strategy is the art of the possible.  But it also depends on persistence. 

eighty yearlong
strategy developed as a response to FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's New Deal was already available to build upon

To help New York City compete with London in global finance President Clinton removed the asymmetric constraints on US finance in 2000 as explained by Matt Taibbi.  And the tax incentives provided to corporations are not historically perverse when they help US corporations out compete other nation's companies and so generate additional US is the United States of America.   jobs and taxable revenues.   But as the corporations outsource jobs and generally disintermediate is the shift of operations from one network provider to another lower cost connected network provider.  The first network provider leverages the cost benefits of the shift to increase its profitability but becomes disrupted.  The lower cost network provider gains revenue flows, expertise and increases its active agents.  Over time this disruptive shift will leave the higher cost network as a highly profitable shell, but the agents that performed the operations that migrated to the low cost network will be ejected from the network.  For a company that may imply the costs of layoffs.  For a state the ejected workers imply increased cost impacts and reduced revenue potential which the state are trading off for improved operating efficiency. 
the loopholes justifications are undermined. 

Johnson & Kwak hoped the government would start bringing down the debt burden while it was manageable.  They assumed President Obama would push to retain the cuts up to $250,000.  They argue to execute the Bush tax cut sunset provisions.  Instead President Obama signed the American Taxpayer Relief Act of 2012 which:
  • Made the tax cuts permanent for single people earning less than $400,000 a year and couples making less than $450,000 a year
  • Eliminated the tax cuts for everyone else and
  • Increased the highest marginal income tax rate from 35% to 39.6%.  Raising taxes remains difficult, sustaining the deficit.  
Similarly Republican actions propose reducing taxes on the wealthy while depending on unlikely growth assumptions to constrain additional debt (Sep 2017). 

The complexity and problems of the US Health network is described in terms of complex adaptive system (CAS) theory. 

The network:
  • Is deeply embedded in the US nation state. It reflects the conflict between two opposing visions for the US.  The emergence of a parasitic elite further constrains the choices available to improve the efficiency and effectiveness of the network. 
  • Is incented to focus on localized competition generating massive & costly duplication of services within physician based health care operations instead of proven public health strategies.  This process drives increasing research & treatment complexity and promotes hope for each new technological breakthrough. 
  • Is amplified by the legislatively structured separation and indirection of service development, provision, reimbursement and payment. 
  • Is impacted by the different political strategies for managing the increasing cost of health care for the demographic bulge of retirees.  
  • Is presented with acute and chronic problems to respond to.  As currently setup the network is tuned to handle acute problems.  The interactions with patients tend to be transactional. 
  • Includes a legislated health insurance infrastructure which is:
    • Costly and inefficient
    • Structured around yearly contracts which undermine long-term health goals and strategies.  
  • Is supported by increasingly regulated HCIT which offers to improve data sharing and quality but has entrenched commercial EHR products deep within the hospital systems. 
US Health care
is a complex network with perverse incentives and broad impacts on the state, national and global economy.  It has been transformed by the battle over the ACA is the Patient Protection and Affordable Care Act amended by the Health Care and Education Reconciliation Act of 2010 (Obama care).  In part it is designed to make the health care system costs grow slower.  It aims to do this by: increasing competition between insurers and providers, offering free preventative services to limit the development of serious illnesses, constraining patients' use of expensive services, constraining the growth of payments to Medicare providers and piloting new ways for PCPs to manage patient care to keep patients away from costly E.D.s.  It funds these changes with increased taxes on the wealthy.  It follows an architecture developed by Heritage Action's Butler, Moffit, Haislmaier extended by White House OMB health policy advisor Ezekiel Emanuel & architect Jeanne Lambrew.  The Obama administration drafting team included: Bob Kocher; allowing it to integrate ideas from: Dartmouth Institute's Elliot Fischer (ACO).  The ACA did not include a Medicare buy in (May 2016).  The law includes:
  • Alterations, in title I, to how health care is paid for and who is covered.  This has been altered to ensure
    • Americans with preexisting conditions get health insurance cover - buttressed by mandating community rating and
    • That they are constrained by the individual mandate to have insurance but the requirement was supported by subsidies for the poor (those with incomes between 100 & 400% of the federal poverty line).  
    • Children, allowed to, stay on their parents insurance until 26 years of age. 
  • Medicare solvency improvements. 
  • Medicaid expansion, in title II: to poor with incomes below 138% of the federal poverty line; an expansion which was subsequently constrained by the Supreme Court's SCOTUS decision. 
  • Hospital Readmissions Reduction Program (HRRP) which was enforced by CMS mandated rules finalized in 2011 and effected starting Oct 2012.  
  • Medical home models.  
  • Community transformation grants support the transformation of low income stressed neighborhoods to improve their lifestyles and health. 
  • Qualifications for ACOs.  Organizations must:
    • Establish a formal legal structure with shared governance which allows the ACO to distribute shared savings payments to participating providers and suppliers. 
    • Participate in the MSSP for three or more years. 
    • Have a management structure. 
    • Have clinical and administrative systems. 
    • Include enough PCPs to care for Medicare FFS patient population (> 5000) assigned to the ACO. 
    • Be accountable for the quality and cost of care provided to the Medicare FFS patient population. 
    • Have defined processes to promote: Evidence-based medicine, Patient-centeredness, Quality reporting, Cost management, Coordination of care; 
    • Demonstrate it meets HHS patent-centeredness criteria including use of patient and caregiver assessments and individualized care plans.  
  • CMMI Medicare payment experimentation.  
  • Requirements that pharmaceutical companies must report payments made to physicians. 
  • A requirement that chain restaurants must report calorie counts on their menus. 


CAS theory represents the Federal Reserve as a
Plans emerge in complex adaptive systems (CAS) to provide the instructions that agents use to perform actions.  The component architecture and structure of the plans is reviewed. 
memetically specified and generated
,
This page discusses the physical foundations of complex adaptive systems (CAS).  A small set of rules is obeyed.  New [epi]phenomena then emerge.  Examples are discussed. 
rule constrained
,
This page reviews the strategy of setting up an arms race.  At its core this strategy depends on being able to alter, or take advantage of an alteration in, the genome or equivalent.  The situation is illustrated with examples from biology, high tech and politics. 
evolved amplifier
,
Rather than oppose the direct thrust of some environmental flow agents can improve their effectiveness with indirect responses.  This page explains how agents are architected to do this and discusses some examples of how it can be done. 
indirectly
performing operations for the US is the United States of America.   government. 

The US system of government is complex.  But this reflects the conflict between opposing long term political/economic strategies.  Simplification, as recommended by Johnson & Kwak, appears to improve efficiency but it probably impacts robustness.  If the inherent tension of opposites indicates issues that have no easy resolution then
Richard Dawkin's explores how nature has created implementations of designs, without any need for planning or design, through the accumulation of small advantageous changes. 
evolution
and CAS
The agents in complex adaptive systems (CAS) must model their environment to respond effectively to it.  Samuel modeling is described as an approach. 
learning
both warn that small changes must be used to avoid possible catastrophe. 

Johnson & Kwak are keen to manage systemic risk by reducing the size of financial institutions.  The dilemma is to support the global competitiveness of the US infrastructure while altering its risk profile.  Already Dodd-Frank is the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.  Its titles include:
  1. Financial Stability creates the FSOC and OFR. 
  2. Orderly Liquidation Authority
    • Section 619 is the Volcker Rule: prohibitions on proprietary trading and certain relationships. 
  3. Transfer of Powers to the Comptroller, the FDIC, and the Fed
  4. Regulation of Advisers to Hedge Funds and Others - which updated the powers of the Investment Company Act. 
  5. Insurance
  6. Improvements to Regulation
  7. Wall Street Transparency and Accountability
  8. Payment, Clearing and Settlement Supervision
  9. Investor Protections and Improvements to the Regulation of Securities
  10. Bureau of Consumer Financial Protection
  11. Federal Reserve System Provisions
  12. Improving Access to Mainstream Financial Institutions
  13. Pay It Back Act
  14. Mortgage Reform and Anti-Predatory Lending Act
  15. Miscellaneous Provisions
  16. Section 1256 Contracts
& CRA is the community reinvestment act of 1977 which requires banks to help meet the credit needs of low-income neighborhoods in areas they serve.
constraints applied to major US banks push the controlled financial activities to shadow banks: Private equity, Hedge funds is an investment fund that accepts investments from a limited number of accredited individual or institutional investors.  Hedge funds are able to use investment methods that are not allowed for other types of fund. 
; which take on the risk and seem to be similarly systemic. 

Johnson & Kwak appear to be counting public health is the proactive planning, coordination and execution of strategies to improve and safeguard the wellbeing of the public.  Its global situation is discussed in The Great Escape by Deaton.  Public health in the US is coordinated by the PHS federally but is mainly executed at the state and local levels.  Public health includes:
  • Awareness campaigns about health threatening activities including: Smoking, Over-eating, Alcohol consumption, Contamination with poisons, Joint damage from over-exercise;
  • Research, monitoring and control of disease agents, processes and vectors by agencies including the CDC. 
  • Monitoring of the public's health by institutes including the NIH.  
  • Development, deployment and maintenance of infrastructure including: sewers, water plants and pipes.  
  • Development, deployment and maintenance of vaccination strategies. 
  • Regulation and constraint of foods, drugs and devices by agencies including the FDA. 
issues as aspects of
The complexity and problems of the US Health network is described in terms of complex adaptive system (CAS) theory. 

The network:
  • Is deeply embedded in the US nation state. It reflects the conflict between two opposing visions for the US.  The emergence of a parasitic elite further constrains the choices available to improve the efficiency and effectiveness of the network. 
  • Is incented to focus on localized competition generating massive & costly duplication of services within physician based health care operations instead of proven public health strategies.  This process drives increasing research & treatment complexity and promotes hope for each new technological breakthrough. 
  • Is amplified by the legislatively structured separation and indirection of service development, provision, reimbursement and payment. 
  • Is impacted by the different political strategies for managing the increasing cost of health care for the demographic bulge of retirees.  
  • Is presented with acute and chronic problems to respond to.  As currently setup the network is tuned to handle acute problems.  The interactions with patients tend to be transactional. 
  • Includes a legislated health insurance infrastructure which is:
    • Costly and inefficient
    • Structured around yearly contracts which undermine long-term health goals and strategies.  
  • Is supported by increasingly regulated HCIT which offers to improve data sharing and quality but has entrenched commercial EHR products deep within the hospital systems. 
health care
.  When public health strategies fail, or are
Terrence Deacon explores how constraints on dynamic flows can induce emergent phenomena which can do real work.  He shows how these phenomena are sustained.  The mechanism enables the development of Darwinian competition. 
constrained
, the problems are left for the health care network to resolve which is typically a much more costly solution. 

Matt Ridley demonstrates the creative effect of man on the World. He highlights:
  • A list of preconditions resulting in
  • Additional niche capture & more free time 
  • Building a network to interconnect memes processes & tools which
  • Enabling inter-generational transfers
  • Innovations that help reduce environmental stress even as they leverage fossil fuels

Creativity
and innovation is the economic realization of invention and combinatorial exaptation. 
are complex
This page discusses the effect of the network on the agents participating in a complex adaptive system (CAS).  Small world and scale free networks are considered. 
network
dependent activities with
This page reviews the implications of selection, variation and heredity in a complex adaptive system (CAS).  The mechanism and its emergence are discussed. 
evolved
Plans emerge in complex adaptive systems (CAS) to provide the instructions that agents use to perform actions.  The component architecture and structure of the plans is reviewed. 
memes
that need protective
Barriers are particular types of constraints on flows.  They can enforce separation of a network of agents allowing evolution to build diversity.  Examples of different types of barriers and their effects are described. 
barriers
to initially persist in the meme pool. 
Good ideas are successful because they build upon prior developments that have been successfully implemented.  Johnson demonstrates that they are phenotypic expressions of memetic plans subject to the laws of complex adaptive systems (CAS). 
Good ideas
need the support of platforms to
This page discusses the mechanisms and effects of emergence underpinning any complex adaptive system (CAS).  Key research is reviewed. 
emerge
Society can ensure the platforms and protected niches are available. 
A government sanctioned monopoly supported the construction of a superorganism American Telephone and Telegraph (AT&T).  Within this Bell Labs was at the center of three networks:
  1. The evolving global scientific network. 
  2. The Bell telephone network.  And
  3. The military industrial network deploying 'fire and missile control' systems. 
Bell Labs strategically leveraged each network to create an innovation engine. 
They monitored the opportunities to leverage the developing ideas, reorganizing to replace incumbent opposition and enable the creation and growth of new ideas. 
Once the monopoly was dismantled AT&T disrupted. 
Complex adaptive system (CAS) models of the innovation mechanisms are discussed. 

Bell Labs
is an important example of the effective societal lifecycle of an innovation factory. 

A vision of the complex US government and its operational economic network can be developed from the two contrasting and conflicting historical visions of the US government that emerge from the morphodynamic opposition of a:

The
This page discusses the mechanisms and effects of emergence underpinning any complex adaptive system (CAS).  Key research is reviewed. 
emergence
of fast and slow decision making in humans undermines Johnson and Kwak's conclusion that each of us must decide if we will fend for our selves.  An
Rather than oppose the direct thrust of some environmental flow agents can improve their effectiveness with indirect responses.  This page explains how agents are architected to do this and discusses some examples of how it can be done. 
indirect
mechanism that encourages deliberate slow thinking, such as the original design/goals of the US Senate, is necessary to effectively evaluate and cope with long term existential threats like the growing national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 





Johnson and Kwak develop a model of our national debt is a pool of payment promises developed to finance costly discrete and transient activities.  Repayments of the capital and interest are made regularly through mechanisms such as a sinking fund.  Charles Montague first setup such an indirect arrangement that allowed thirteen and a half million pounds in British war debt (using a million-pound loan serviced by 99 years of new excise duties sold to the public as annuities) to persist in 1693 and supported it with a sinking fund in 1696.  This strategy was viewed as scandalous by conservatives at the time.  The conservatives argued the debt should be liquidated but Montague's strategy allowed Britain to develop and sustain, until the 20th century, a triple-A fiscal reputation and allowed it to use financial leverage as a weapon of war.  Montague's strategy was enabled by the revenues Britain's merchants were obtaining from its developing global trade.  CAS theory looks at the pool as a collection of commitments to provide energy to the owners' of the promises. 
using US history to illustrate its key facets.  They show how the debt is intimately integrated into society.  And they argue that each citizen must develop a vision of the role of government to understand the debt's impact on our future and to help shape an effective political response. 




























































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integrating quality appropriate for each market
 
This page looks at schematic structures and their uses.  It discusses a number of examples:
  • Schematic ideas are recombined in creativity. 
  • Similarly designers take ideas and rules about materials and components and combine them. 
  • Schematic Recipes help to standardize operations. 
  • Modular components are combined into strategies for use in business plans and business models. 

As a working example it presents part of the contents and schematic details from the Adaptive Web Framework (AWF)'s operational plan. 

Finally it includes a section presenting our formal representation of schematic goals. 
Each goal has a series of associated complex adaptive system (CAS) strategy strings. 
These goals plus strings are detailed for various chess and business examples. 
Strategy
| Design |
This page uses an example to illustrate how:
  • A business can gain focus from targeting key customers,
  • Business planning activities performed by the whole organization can build awareness, empowerment and coherence. 
  • A program approach can ensure strategic alignment. 
Program Management
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