Aaron Black

This paper introduces the Fiat-Credit Allocation Theorem (FCAT), developed by Aaron Black. Since the collapse of Bretton Woods in the early 1970s, advanced economies have operated under a distinct monetary and financial regime characterized by pure fiat currencies, elastic bank credit creation, and widespread securitization of cash flows. The Fiat–Credit Allocation Theorem (FCAT) is a structural law governing credit allocation in this post-1971 era. In a fiat system with low-friction securitization, credit endogenously expands into securitizable assets whenever their perceived risk-adjusted expected returns exceed the system-wide required return on risky capital (r ˉ), and contracts when returns fall below this hurdle rate. In equilibrium, risk-adjusted returns on funded securitized cash flows converge to r ˉ, creating a yield-arbitrage mechanism that drives sustained asset-price inflation, financialization, rentier dominance, and recurrent credit-driven booms and busts. The theorem formalizes this process in a minimal continuous-time framework, proves convergence under mild assumptions, and interprets key post-Bretton Woods phenomena—decoupled capital returns from wage growth, persistent r>gdynamics, and leverage cycles—as equilibrium outcomes rather than anomalies. Empirical proxies, including yield convergence across securitized asset classes post-1971, support the model's predictions. FCAT provides a unified micro-founded explanation for the regime shift from production-constrained credit to yield-chasing credit, with implications for inequality, affordability in essential sectors, and the limits of supply-side reforms.

This paper develops a unified theoretical framework for understanding the post-1973 divergence between the price of essential goods and the trajectory of median wages. It introduces three formal results that jointly explain why affordability has declined across housing, medical care, education, food, and energy despite decades of policy reform, technological improvement, and supply expansion. The Rentier–Asset Impossibility Theorem (RAIT) demonstrates that once essential goods acquire positive exposure to financial markets and are governed by required return floors, long-run price growth must exceed median wage growth even under ideal competitive conditions. The Asset-Pricing Constraint on Essential Supply shows why additional physical capacity cannot restore affordability in such sectors: when prices are pinned to financial return requirements, new supply primarily expands the volume of investable claims rather than lowering long-run price levels. A third contribution, Dual-Curve Pricing and the Asset-Pricing Floor, formalizes the mechanism by which asset-pricing dynamics supplant ordinary marginal-cost pricing in inelastic necessities. Together, these results recast the affordability crisis as a structural feature of an asset-priced regime rather than a contingent policy failure. The paper situates this framework within a broader philosophy of economics by arguing that the transition after 1973 constitutes a regime shift in the ontology of essential goods—from wage-tethered utilities to financialized assets. Empirical signatures predicted by the theory (timing, magnitude, selectivity, and real-rate sensitivity) appear across every assetized sector. The concluding section argues that restoring affordability is not a technocratic optimization problem but a regime choice: societies must either maintain essentials as high-yield financial assets or reclassify them as low-return public utilities tethered to wages.

Modern physics is built on the assumption that time only moves one way, beginning at the initial boundary (or initial condition), fixed effectively at the Big Bang. Our theories begin at that starting point and evolve from there. Yet the laws of nature work both forward and backward. This one-way view lies at the root of many of physics’ biggest puzzles, like wavefunction collapse, quantum “spookiness,” the arrow of time, and the clash between quantum mechanics and relativity. Two-Boundary Theory (2BT) proposes a minimal correction: the universe is a unique four-dimensional history jointly constrained by two real temporal boundaries, an initial (α) and a final (Ω). No new dynamics or hidden variables are added; the same lawful evolution operates in both directions, and the realized world is the intersection of the forward image of α with the backward image of Ω. From within time, partial knowledge of α and ignorance of Ω make outcomes appear stochastic and the future “open,” though the underlying history is globally deterministic and locally causal. This two-sided admissibility resolves the major paradoxes in a single move: Bell-level correlations arise from whole-trajectory consistency rather than superluminal influence; measurement collapse becomes an epistemic update, not a physical jump; and the arrow of time reflects asymmetric boundary information, not asymmetric law. The analysis preserves unitarity, covariance, and conservation principles intact. The paper confines itself to the conceptual and ontological core of the framework; later work develops the informational field Φ(t) and weighted-operator formalism that implement the same constraint mathematically. The result is an Ockham-minimal, time-symmetric completion of the scientific worldview: one reversible law, two boundaries, one consistent universe.