Power to coin and Power to tax

You might write instead a commitment to repay deficits from the ordinary budget but to ignore deficits from the emergency budget.

Cochrane on the ability of Treasury to double spend. The quote is his thumbnail version. 

He is not only right, it is the Law. A sheriff can come and takes John's house if he promotes an alternative theory. The key is they are almost separate powers, enforced over separate paths. The problem is they are executed to far out of sync.

Under the gold standard, government owns a huge chunk of gold, and it can withhold or flood the market by fiat, the is the power to coin. But it is not completely unconnected, the power to buy gold with paper derives from the power to tax with paper and the willingness of the county sheriff to live in the government sector.

When is the power to coin exercised?  When the debt is unacknowledged by the power to tax. In that event, the Treasury has monopoly regulatory control of the banks and begins a fiat tax collection. The combined legislature is an agreement, we have long lost the source of those losses and a general value added flat inflation tax is arbitrarily imposed by Treasury, a double spending.  

There is a residual unresolved loss due to the hard bound, the Law. Look at the level of those remits, and ask yourself what sort of political coalition will propose a federal sales tax? None, in any foreseeable future. So the banks are under permanent future liability and we exercise the power of coinage, double spend. We have to devalue, we have to get the banks under regulator liability.

Inevitable demographics.  People get born and die. The liability chain gets long lost, it does not contain residual votes.  These are actually accounting losses because we do 2D accounting in a 3D system.   Double entry accounting nets out the transaction cost of banking, assumes it negligible. But double entry accounting is hugely efficient. 

But, we are an unbalanced, government  monopoly tax dollar in the numerator; government goods flow always a bit less productive. Less in the sense that some level of goods volatility cannot be congestion priced, the pit bosses lose money. This is the cost of state changes in the goods network. Evens when Treasury does a sign change in the inflation tax, flipping the binomial and the loss is the unexpected drain to petty cash, ex ante reserves. A small productivity loss relative to any realistic view of government, so to speak. They appear as sudden micro bankruptcies everywhere in government value chain, petty cash almost good enough.

How do we measure the losses? When we get the 'Been there, done that', in the market.  The loop is recognized, and priced. Then we judge by current price, and those remits are a well measured flow. We are due for a long term one point inflation tax, which I unilaterally expanded to two points. Enforceable by Law, at some point, that Power to tax will overcome that fiat bank fee. That point is a Nash, the market becomes a binomial bet once again reverting to double entry accounting..