The Fiacracy; A Mental Model for Modern Government

This article will explain the following:

1. What is a Fiacracy

2. How do Fiacracies NOT work

3. How Fiacracies work

4. Are Fiacracies sustainable

5. Why Fiacracies matter

1. What is a fiacracy?

It’s government by fiat (money). The driving mechanism by which it works is not voting (democracy), a royal family (monarchy), or even a stable ruling elite (aristocracy, oligarchy).

It’s a government driven mainly by the creation and movement of currency, fiat.

2. How do fiacracies NOT work?

In school you were probably taught that your government works like this:

A. People vote for politicians

B. The politicians use tax revenue to provide services for voters

C. If taxes get too high or services too bad, voters substitute the politicians responsible for new ones who will be better

Fiacracies have voting, politicians, and taxes, but this is NOT how they work.

3. How do fiacracies work?

A. People vote for politicians

B. Politicians allocate money for services

C. A central bank creates new money to pay for these services

D. If voters do not like the politicians or what they are doing, they change them out for new ones

What’s different between between this system and the last one?

This system has only one check on government action, voting, whereas the other has two, voting and taxes.

A concrete example:

It’s much easier for fiacracies to go to war because taxpayers don’t need to pay for it, they just need to vote for it.

And it’s also much easier for fiacracies to do handouts, whether it be for the rich, the poor, or the companies’ shareholders which benefit from war.

Why is it so much easier? Because no one has to pay for it. All it requires is votes.

An uncoordinated consensus exists between politicians, the central bank, and voters to keep the system going.

If politicians don’t spend they don’t have political support and they get voted out.

If the central banks don’t finance the spending they know the system collapses resulting in chaos.

The voters are subjected to propaganda (oftentimes paid for by the government itself), don’t know what is happening, and if they do, why end the system and face chaos?

Uncoordinated consensus.

4. Are fiacracies sustainable?

Let’s answer the question in reverse:

What would make a fiacracy unsustainable?

A. People must be willing accept the newly created money, otherwise government cannot provide services nor effective handouts.

B. People must believe in the system and its fairness or they will revolt

C. It cannot be too easy to convert the newly created money into other currencies that are perceived to be more stable

D. If money is created too fast, handouts will overtake the creation of value as peoples’ focus and people will stop working causing system collapse

E. Handouts must be allocated fairly to system participants or the system will face instability from groups who feel shortchanged

F. Greed. If a powerful group makes too much money for itself without acknowledging the delicate balance between the participants in the fiacracy, the system will destabilize and die.

G. Immigration/emigration. Countries mostly are not closed systems and the arrival of new voters or their departure can cause violent swings how new money is allocated, which is the main determinant whether people continue to support the fiacracy system.

We can see from how many different ways they can go wrong that individual fiacracies are generally unstable, but with proper management and the right general conditions they can last for a long time, particularly if culture, education, or propaganda (which can be paid for with fiat) are conducive to the maintenance of the fiacracy.

5. Why Fiacracies matter?

They matter because of how ubiquitous they are and how increasingly large government spending is relative to the overall economy. Politics in a fiacracy is, at its core, a fight over access to the newly created money enabled by achieving a voter majority.

Once you understand that and how fiacracies work at large, you can both benefit yourself, but also predict and maintain your country’s stability.

The fiacracy is a useful mental model that explains better how things actually work than what we were taught in school and told by media.