Saturday, October 15, 2011

Bundles of inputs

Commodities, labor, land, as inputs to production. Money is supposed to average these networks of distribution, money more accurate when the piles of bankers and piles of inventory match.

Money will have greater mutual entropy with the most constrained inputs, the highest correlation, in the Bellman sense of following the frontier. The webosphere is looking at price changes on bundles of commodities, commodity prices have gone down, is this a trend?

I tell these pundits to look at how the commodities correlate with money, look at their nominal and real price, over time. Constrained inputs get more probable price updates, they will track money more closely. Someone else pointed out to me the relationship between nominal and real oil prices, look at that.

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