Wednesday, October 7, 2009

Yields and waves and asymmetry

If I go grocery shopping can I buy an order for the future delivery of tomatoes, perhaps at a discount? Sure why not. One problem, I wasted part of my trip to the grocery sore, no tomatoes, just paper. Negative inventory, in the same bag as bankruptcy, is very very inefficient. The inefficiency of bankruptcy is a non linear break, that is bankruptcy doesn't last long, it is short term with exrtra-ordinary transactions costs. So, goods flow always favors positive inventory, and when retail goods depreciate, that means positive growth.

So, even absent structural limits, the economy always engages in rapid deflation, slower inflation. If the yield curve were a Fourier transform, it would be a tall peak, and when that tall peak tlits right, it tilts toward negative frequencies, downturns, bankruptcies. It's tendency would be to deflate rapidly back to a positive inventory flow. taking depreciation of infrastructure as necessary. The economy would always favor overproduction for fear of negative inventory.

No comments: