Sunday, August 31, 2014

When the radius is three

For any sphere, using whatever units, the area and volume are equal at r = 3.  In the proton, the match is when N = 91 in phi^N, and one third of that is N=30.333, and that is a match with (3/2)^36, and 36 * 3 = 108. So, if this theory is correct, then indeed the key variable is sphere area to volume. That is the point of maximum packing. The reason is that the surface area is as equally dense as the volume so space is least wasted. This is true with Phi and only a radial degree of freedom. Add spin and then add charge and the point can be shifted because the units of counting change, and the change is permanent with no redundancy.

Combining hyperbolics in the quark system

What do we know?

Shannon holds so sinh^2 = 1 + cosh^2. This includes the band gap for spearability and makes finite order hyperbolic wave.

In the quark system the band gap is shared so:

s1^2 + s2^2 + s3^2 = 1 + c1^2 + c2^2 + c3^2  They are triangular because they can make band gap noise triangular.

We know that the quarks cannot exceed the Higgs band limit, the color white.

s1*s2*s3 = K

We know they are pairwise separated to make the Efimov:
s1*s2 + s1*s3 + s2*s3 = E

We know the lower band limit is set by the electron orbitals and that should be the Compton bandwidth standardized by 1836. So the spectrum is contained:
s1+s2+s3 = S

We have the root system, and we already know the roots from previous work.  So, just skip the Boson thing and use spectral definitions instead. And we know the spin and charge are just quantum shifts in the cosh and sinh functions, on a unit circle basis.  These shifts narrow the hyperbolic angle and complete the flow between unit spheres.

Model the thing as two simultaneous exchanges per unit sphere, but allow for possibly three. So there is an additional warping noise on the unit spheres. But the limit of two exchange per event makes Efimov fundamental. The other fundamental is no redundant spectrum.

Peter Gorden is smarter than the average economist

Transaction costs are the key part of transaction rates and transaction noise, and transaction rates make up the economy.  How could economists leave this out of their models and still make useful results? They cannot.
Transaction costs: It seems strange but for most of its life, economics was a field of study that did not recognize transaction costs. Look at the 200-year Ngram results, below. Ronald Coase changed things. Without him, we would be stuck with Nirvana economics, still teaching things that students could easily see are not terribly useful or linked to the world they know.

Mark Perry sends us to the Calafia Beach pundit

And we learn that John Keynes was an ignorant:
In the six years ending June, 2014 (a period which encompasses the worst of the 2008 financial crisis and the entirety of the recovery to date), the after-tax profits of U.S. corporations totaled about $8.9 trillion. This marked an all-time record for corporate profits, both nominally and relative to GDP: profits averaged about 9.4% of GDP per year. By comparison, over the past 55 years, after-tax corporate profits have averaged only about 6.4% of GDP per year.

Over the same six-year period, the federal government borrowed about $7.4 trillion from the U.S. and global capital markets to fund its deficit. This resulted in a doubling of the federal debt burden, from 36% of GDP in mid-2008 to about 73% today.

Despite assurances from politicians and most economists of Keynesian persuasion, not only did the biggest and most rapid increase in our federal debt burden since WW II fail to boost the economy, it coincided with the weakest recovery in history—growth of only 2.2% per year on average. (I was among those who warned in late 2008 that this would happen, and quite a few times over the years following.) This is not a problem of not spending enough, it is a failure of ideology, and arguably the most expensive such failure in the history of the world.  
Here's the failure in a nutshell: The government can't stimulate the economy by borrowing from Peter and sending a check to Paul, because that doesn't create any new demand—it's like taking a bucket of water from one end of the pool and pouring it into the other end; the level of the water doesn't change. And the government can't stimulate the economy by spending more, because the government is notoriously inefficient (not to mention the fraud, waste, and incompetence that surround most major public initiatives); the private sector is far more likely to spend its money wisely and productively than the government is. Growth only happens when an economy produces more from a given amount of resources—when productivity rises. And productivity only rises when people work more, smarter, and more efficiently, and that takes hard work and risk. You can't just dial up productivity, you have to work for it. We can't "spend our way to prosperity," as the late and great Jude Wanniski told us.

Saturday, August 30, 2014

Shannon's world where wires were uniformly dense and round

His model of the signal was that its power fell are the square of the frequency. So, ln(1+e^[-x*x]) always came to K*-x^2 , where K represents the clock and noise spectrum. So when sending the log, x was recovered by taking the square rootL:(-K*X^2)^(1/2), and that led to sampling at twice the signal rate to recover the signal and led naturally to a binary counting system.  We need to talk cubic signals.

But first, why do signals fall off as f^2 in the engineering world?  Mainly because disruptions come from echoes vertical to the line of sight.  At high frequencies, the return echo from the surface of a wire, for example, falls on the next cycle, while at low freque3ncies it falls on the current cycle.

Spectrum, sphere packing and quarks

We have quarks because there are few configurations for packing three spheres in the center of the proton.   Its a volume to surface area problem.The edge of the proton is right where the Compton spectrum almost nearly matches the Null numbers.  So the packing would leave mostly trapped light and kinetic energy would have to be narrow band and very high frequency. The density gradient so high that the spectrum would have a very long tail to the edge, all the way to the electron band where electrons would form. So, the system was stuck with the electron and needed charge to hold them together.  But a phase shift in the dense nulls in the center needs band stops for kinetic energy. Kinetic energy eats up bandwidth if you have this huge unite sphere.  So break them in two and have opposite spin? Then there is unbalanced charge because we still need to fill the electron spectral gap.

This works. The Y axis is the Compton spectral match, it is optimum at zero. The Efimov solution, it allows a net positive charge and room for high frequency motion of the unit spheres.  Unit spheres have wider or narrower hyperbolic angles when we phase shift. 

I think that right, I will double check.  In this case the two quarks with negative positive charge got the narrow angle and the quark with  positive negative charge the wide, making the isosceles triangle. The two symmetric quarks use the symmetric cubic root and thus operate with a shift in delta N between them, their quantum numbers must have an integer shift. The unit spheres move inside and along the arms, I think. If this is right, then the electron has the narrowest wide angle, I need to think this through a bit.

So am I saying that fibonacci numbers have size?

I dunno, I may have myself in a pickle, still thinking. But most likely both bubble sizes exist in streams. They will sort themselves out.

Having a very good Compton spectral match.  This is the peak of the proton, very well matched.  The quarks try to remove phase imbalance by kinetic energy but get close to equilibrium and kinetic spectrum is gone. The  positive quarks move along the circle to the negative quark, acquiring charge.  With only 1/3 charge, they quickly cease moving. And they always keep one quant apart along the hyperbolic arms. So they see saw. The quark with the negative positive charge is pulling in positive negative from the electron. I doubt these unit spheres can make more than two exchanges at a time, and mostly use one hyperbolic arm to point skyward, outside the bag. Inside the spheres they run a log network, a finite graph with the 1/F, and the ins and outs have to closely match.

No, Stanley Jaki, physics will certainly use simple math

Stanley Jaki, in his 1966 book The Relevance of Physics, pointed out that, because any "theory of everything" will certainly be a consistent non-trivial mathematical theory, it must be incomplete. He claims that this dooms searches for a deterministic theory of everything.[27] In a later reflection, Jaki states that it is wrong to say that a final theory is impossible, but rather that "when it is on hand one cannot know rigorously that it is a final theory."[28]

This is wrong, mainly because in sub atomic physics the IQ of the elementary thing is  1.5.  Any unit sphere in atomic physics likely get only two things balanced for every three things exchanged.    Hence, it is not very parallel in its operations. Ultimately, I think we will be able to describe the proton without using any integer number higher than 32 and without using any fractions other than 1/2 or 1/3. Its a simple fact that the vacuum has only a small reach, each exchange it does likely connects less than five neighboring parts of the vacuum.

Take my spectral chart for example. I have irrational Phi, the golden ratio and exponents up to 127.  But that was me the human, using infinite math to approximate the simplicity of nature. I was mostly fumbling and experimenting.  But the vacuum itself, was using a rational fraction, and an exponent not much bigger than 17. The vacuum then switched to a second rational fraction, analogous to the second Lagrange.  Add in the third Lagrange, also a rational fraction, and all told, I doubt the vacuum uses a total exponent greater than 16, and of that is only uses is in four consecutive ratios not exceeding five.

Is it possible to use elaborate math and show the vacuum always uses small numbers? Hard, it is easier to simply use the stupidity of the vacuum and prove it know nothing more than five, and five is a lucky guess for the vacuum. 

Or consider charge, as an inverse r^2 function. Hard to prove how that works, but once we realise that all thing are spherical, then we can see the r^2 comes from tangential motion of a wave summed up.  The r^2 comes from finite differences. The vacuum does not use integrals. The vacuum can do 1/2 and 1/3 fractions, mostly because the  vacuum constituents come in triples, and one is inert. Fuzzy balls, spinners, charge and quarks all result from these simple difference in vacuum components. Inside the unit sphere, the vacuum can only maximally separate three independent flows. Look at the periodic table, hardly a multiple of five in mass. We do not see five in nature until we get to complex biochemistry.

The entire spectrum of mass motions is no more than  five.  Look at atomic orbitals, four quantum numbers and they rarely count to more than four. The entire system is built on the concept that things that do not fit fly away as light. Even the Higgs mechanism only happens because bubble can only deform into ellipsoids, that set the complexity of motions. The vacuum does not even know square roots, much less cube roots.  It has these roots approximated by ratios, and all ratios are made from, combinations of extra coagulants.  The roots are simply bounded, and kinetic energy naturally finds better approximations. Spherical composites rule simply because the vacuum can barely manage two degrees of freedom, and radial symmetry is best when it only has three different constituents.

Even phase offsets, or imaginary numbers are impossible. The unit sphere cannot hold one exchange in abeyance to exchange the order of events. It has no queue management in exchanges. I doubt gravity makes more than 40 exchanges a second, slower than an ancient modem. The proton is everywhere, simply because there are so few starting points and the process so simple that only a few stable outcome are possible. And there seems to be a shortage of Higgs nulls in the universe.

 The vacuum works works because squeezing in anything unstable is too complex for a simple vacuum.

Friday, August 29, 2014

We cannot treat charge and mass separately in the electron

If we believe in the Higgs null, then we believe that electrons can lose a bit of mass and gain a bit of charge.  We also have to believe that the electron can be destroyed on one place within the orbit and reformed in another. Our problem is the invention of the Higgs quant field, sorry, but it changes everything.

I will be using that equation above for the electron. Its solution is tanh(x), and that equation says the force acting on a unit circle is equal to the unit circle minus one unit of mass.
I will be placing the unit circle inside the hyperbolic arms and move it back and forth like a reversible shock wave.  When that electron moves down the X axis toward the proton, it gains a little mass and loses a little charge. The unit circle is moving to and fro within the hyperbolic arms, and the arms are conduits for removing and adding quants of Higgs null. (Somewhere around 3000-5000, to the nth power (n from 1-6 typically) little vacuum bubble of Higgs in each exchange.

It is impossible for any physicists to talk about distribution of charge without talking about distribution of Higgs nulls they are very similar constituents of the vacuum, except one is inert. The cube in that equation above results from the combined effect of less charge and more mass, in the unit circle, as it moves toward the proton.

Its not really charge

Its big bubbles(positive) vs smaller (negative) .  It about fitting inside the large proton sphere.  When the electron moves toward the proton, it gains more big bubbles, it don't fit any more in that direction. So those hyperbolic arms move big bubbles up one direction and small bubbles down the other. The quarks have the same feature, and they lock arms toward the center, and the other arm point outward, running along the surface. It is all local action, it is all relativistic.

The angle of that hyperbola, it is narrow at high energies,  more motion fits into smaller spaces, that is compaction.  It is all about three bubble sizes and in the process of trying to fit, they have curved space, small bubble toward the center.

Why are quarks different?
 The Efimov effect.  The arms of the hyperbola do not [point toward the center. The do little movement to and from the center because the exchange is along the surface of the sphere and the arms are parallel with the sphere surface and exchange only with two  neighbors.  The 'bag' as MIT calls it:
The MIT bag model confines three non-interacting quarks to a spherical cavity, with the boundary condition that the quark vector current vanish on the boundary.
Close, they need the Efimov effect.  But the 'bag' itself has it own hyperbolic arms, moving positive charge to the electron and negative charge to the outside surface of the orbitals.  Think flow, three sized bubble trying to fit in this curved space.
The surface current on that bag are high frequency, near the Higgs band limit. Add energy to the system and the three quarks flip to different positions on the surface, using kinetic energy to gain the bandwidth needed.  Those positions are complements to the electron orbitals at high energies.

The day is coming when physicists and mathematicians will simply write out the spectral modes for three sphere packing under a given space curvature.  Physics will suddenly be a lot simpler.

That is why I like the hyperbolics

They make grid spots in space, which is exactly what the Higgs field must be doing if you believe in Higgs at all. Hyperbolics are a tool for local spectral separation analysis, and support local wave motion eliminating any need to fiddle with relativistics.  And if you believe in the Higgs quant, then you have to believe in the light quant, and you must therefore believe that light quants come in two, similar but different quants.  Physicists are trapped, they are bound to believe in the Vacuum Theory of everything.

Using tanh when F is F(x,y)

Last post I outlined a possible method to using tanh to define a set of quantixed grid sizes such that a digit system iw optimum in measuring:
 F'''= a +b*F + c*F^2 + d*F^3
The was not to find F but to design a decoder that decomposes signals from F into a small set of digits optimally weighted to measure the structure of F, the optimum analog to digital converter for an equation of the form above.

I used tanh(n) with N integer, because tanh is the deviation over the mean, it gives me an individual grids in space, each grid size matching some n,
n= 1..Nmax.
What is the proper grid size when F = F(x,y)?

The trick is to only work along lines of symmetry where the result F''' can be separated. Thus, the grids, tanh(n), can all be assigned in the m dimensional space, along lines of symmetry.  In two dimensional space, the set of exponents, n, will be of the form n[i,j].  So we quantize x to i, and y to jy and x must have a relationship along the line of symmetry, x = g(y).

If we do this right, normalize the total of grids to the unit sphere,  assuming spheric symmetry, then the power series b^[-k*a], where a is the computed efficiency, and dependent on n, the digit number. We get this result when the base is not optimum.  F'' is, in general, a third degree and not be square symmetrical.

And k is a possibly repeated series of n*[1..3], then we should be maximum entropy and meet the Shannon condition.  So we can draw the probability distribution of the grid sizes. Without even knowing F or its symmetry, we can try matching function to distribute the grids over the sphere volume and meet the distribution shape.

But isn't deviation/mean a two dimensional? Yes, and I have not thought that through, but it would introduce some slight error.  What are the limts on F'''? Well, tanh^n, n=1,..4; say, they are even odd functions with varying slopes; and not positive definit. I am working the rest of the requirements as we speak.

Quantizing tanh and measuring stuff

Using any recursive series which has an expression for powers of a base.  So tanh become a ratio of two irrationals. Many differential equations can be recast as power series of Tanh because any differential of tanh is a power series in tanh.  But with a recursive quantized solutions for the powers of an irrational root, any power of tanh resolves in a ratio of two first order combinations in the base.

 Simplifying tanh requires some base such that:
b^n = kn*b + kn-1 where the kn are a sequence that is recursively known. Then the variable x becomes ln(b)*n, where n is the quantizer.

Its pretty sticky, dealing with both b and its log.

What's the point?
The idea is to make the optimum analog to digital converter, or a digit system, that is tuned to measure the third derivative of some signal that is partitioned.
The equation is: F''' = a + b*F + c*F^2 + d*F^3

So the power series in F measures the third derivative of F.  We do not want to know F, we want to know a good digital measurement of F which uses a base that optimally partitions F into its short to long wave components.

The hyperbolics have this characteristic: deviation^2 = mean^2 -1, which says that any hyperbolic line guarantees that there is enough space to measure the mean value plus a gap and not exceed the deviation. So the idea is to pick off a subselected set of the tanh values that holds an optimum deviation/mean value matching the partition of the triple derivative.

Instead of the original equation consider:

a+b*base+c*base^2+d*base^3 = 1

This measures one unit when for a point solution at base. But it spreads the signal optimally over all the digits in base, measuring the smallest unit of F encountered. But we can scale this equation, multiplying by b^[1], n from 1 to N. Each time we scale, we move the optimal four digit system to the level of the signal, each time scaling the digit system to match the signal strength. Base, then is the partition function for the signal. The b^n will not uniformly increase but form an expandinging wave.

So its all about designing the optimum analog to digital conversion system that matches the signal.

Tuesday, August 26, 2014

Increased demand for safe assets

The ten year bond in blue. It no longer yields enough to cover nominal growth, in purple. Exporting nations save more than the USA, their main customer.

Brown declares Mexico/California Federation

On Monday evening, California Governor Jerry Brown said all Mexicans, including illegal immigrants, are welcome in California. 

According to the Los Angeles Times, while introducing Mexican President Enrique Peña Nieto, who said America is "the other Mexico," Brown "spoke about the interwoven histories of Mexico and California." He "nodded to the immigrants in the room, saying it didn't matter if they had permission to be in the United States."
"You're all welcome in California," Brown reportedly said.
Brown has made California a sanctuary state by signing the Trust Act, giving driver's licenses to illegal immigrants. He has also expanded financial aid to illegal immigrants by signing the California DREAM Act. Peña Nieto reportedly "thanked state officials for embracing foreigners citing measures that extend state benefits to immigrants."

Monday, August 25, 2014

The Schwarzchild radius, for example

The radius at which liquid mass had strong enough gravity that light cannot escape. This is all based on an assumption about light matching mass (energy equation) and the Compton frequency. Instead treat light as a finite spectra signal, and the sphere captures more spectra toward the center, as that is the Hamiltonian assumed. So Schwarzchild simply integrates the spectra from the center out until there is no more. The built in assumption is that light has a bounded cubic spectrum.

Do it different. This is problem in subdivision, what is the bounds when the subdivisions increase? But the subdivisions are recursive of order n, which is hyperbolic, spherical. and composed of linear Bournilli numbers. The Compton radius goes to zero faster than light has spectra. Tanh(n) gives you the bounds on the slope of n when n is an exponent of e.  It is just the general form, the relationship between n and the slope of the function is created. Tanh(n) is the mean over the difference in at n: Of the functional on tanh, limit ourselves to spherical and small n.  n [1,2,..N] has to be symmetric with respect to a unit sphere. The maximum rate of action is along the hyperbolic arms, and has sign.

Time dialates as R increases?    So that makes Tanh*(n) the Compton wave at n? Bandstop is lower, frequency is lower, mass is lower, n is lower.  If the unit circle moves as 1/F, such that the sum 1/F, to some integer power, f=1,2,3,.. is the Zeta function, and likely finite. So the unit sphere emits and absorbs  flow in units of 1/F, F is short order recursive. to make the Zeta = 1. Like the sum of 1,2,3 all taken to the mth power, m <=3. Doing so marks its bandwidch in sinh^2 - cosh^2 = 1.

So, any unit sphere in the spherical environment can emit and absorb the 1/f, in some limited order. The 1/f are Higgs Nulls, and act as band stops in the spherical system. Unit spheres have three groups of recursive 1/f, I most, recursive in quant number.

Great model, but says nothing about physics, it talks to the grid size in spherical systems matching the equations of motion. Shift in N such at:
a*Sinh(n)^2 - b*cosh((n)^2 = 1 are considered.

Sunday, August 24, 2014

Vieta's formulas

Bounding the roots of polynomials

For the cubic polynomial P(x)=ax^3 + bx^2 + cx + d, roots x1, x2, x3 of the equation P(x)=0 satisfy:


The xi are roots. These formula propose picking roots one at a time, two at a time, or all three. So, as a probability spectrum, convolving this with the square root form we can make leptons conditional on spinners. The X are discrete, defined by b^[mQ].  With m small, recursive, so local inventory is available.

The X are units of the smallest Higgs quant we know of. They live in a spherical, differential world, hyperbolic world relative to quant number.  We assume Lagranian bases.  The coefficients, b,c,d are the band limits of light. So the system is composed of linear, quadratic, and cubic bases, and have difference equations along the exponent quant axis.

The finite log network is interleaved 2-ary and 3-ary. It computes the spectrum. This thing is likely in the unit circle. frequency decreases? going out from the unit circle?

In a measuring sense, the Tanh(x) gives us the grid size that maintains error bounds. Then we add whatever Hamiltonian we want to the quant system. I like the Hamiltonian of bubbles in space.

The democratic crisis in one chart

The Great lakes and northeast corridor are being evacuated, the pattern is movement to the west and southwest. In 2021, about seven years, California, Texas and Florida will send about 145 delegates to DC, and six Senators. The system will not work.

Saturday, August 23, 2014

This tanh, part two

We pick the tanh because it gives us the maximum possible slope of thing we have to measure, and the more slope the more marks our yardstick, when we count things in sets of X. X is either the frequency or the wavelength (up or down)  of one particular marking quant, Qk. It looks like b^[m*Q], all f(X) having the exponential form. If f(X) are solutions to Tanh(X) polynomials of small order, then Tanh(X) can be b^[m*Q], I think. Or better yet forms like:
b^[n] + b^[-n].

So lets count exponent m up in frequency then the Shannon condition is:

[m*Q]/[b^[mQ] all be less than one, then m can grow without bound, I think.

My favorite president is coming to Sacramento

LOS ANGELES (AP) — Mexican President Enrique Peña Nieto is coming to California at the invitation of Gov. Jerry Brown, less than a month after Brown visited his country.
The two will address hundreds of Mexican Americans on Monday in Los Angeles. On Tuesday, Brown will host a luncheon in the president’s honor in Sacramento. Pena Nieto will then address the Legislature at the state Capitol.
There’s no immediate word on what Pena Nieto plans to say, but Mexico and its northern neighbor share concerns about a host of issues, including immigration and pollution.
During the governor’s trip to Mexico last month, Brown signed nonbinding agreements on trade, education and environmental cooperation. Brown also promised to work with the U.S. government to find a long-term solution to the immigration crisis.

Friday, August 22, 2014

The Tanh expansion

The top one. The B2n coefficients are Bournouli numbers.  They are coefficients in a finite order polynomial that computes the term on the left.

That term, Sm, by my interpretation, is the total number of marks on a ruler for each of m subdivisions over the k th integer subdividers.
The tanh(x) is a power series of  of possible total marks on all rulers, for all the possible subdivision exponents. Tanh(x) is also the bounded slope of the ruler measuring error, when x is sequence F+1/F/(F-1/F).  Each Sm(n), can be formulated as recursive in a polynomial of order n.   n is he total number of things being rearranged. So tanh(x) giving the maximum error when we have an infinite number of integers having m subdivisions. But tanh x is also a power series solution to differential equations on the sphere, and we are mostly limited to 3rd power differential equations. If we limit x to quantized values, then we can limit ourselves to local solutions bounded by 3. A general system for spherical differential hyperbolic wave. A recipe system for bounding the measurement error using local estimation.
So with x integerized then the bounded measuring error is a integer sum of things in groups of order three.  x can be represented by a base with integer exponent.

The Bond market and the ten year note

 The agent in the market is in bounds regarding the linear cost of government. So it can guess the cost of any given presidential regime in DC. within some stable bound. Agents then trade bonds for something near the eight year mark. The agents make money work. The eight year term is passed when government asks for extensions.

 DC was over the  ten year half of post crash, and visa versa.  When DC asks for extension, unexpected from Obamacare,  we get a big rate jump. Terms are matched, and they are quantized. DC has to dump extra debt long term, extending the payment period.

Why not the California Peso?

A digital currency, valid for all taxes paid to Sacramento.

We got the smart card terminals, they are here. Cal legislature just votes the Cal Peso into existence. Then everyone's got to trade the peso for tax payments. A brand new currency usable anywhere in California. The State of California makes all payments in the peso. The state creates 1% of the peso YoY as seigniorage. We would gain a huge efficiency in consumer transactions. The governor can borrow long for the water project.  The government gets a clear 1% discount from the market money rates. It can be taylored as a water investment fund. Turn a problem into a solution. Of course the currency would dominate across the west, smart card available. The state need only guarantee an interest expense  of 2% YoY, for water construction. That gets them a 20 year line of credit. And Jerry gets out the mole machines.

This works because the state can trade water debt directly to the construction firm. So the currency flows from the water industry first.  The secondary market spreads the currency across California and out west a bit, but no more. Texas can do their own peso, and Mexico has theirs. Trade their debt up and down the curve.  Great idea.

The clear idea is that an artificial river from the north is valuable.   And Jerry Brown guarantees us a new digital currency in return. A fair trade.

The ridiculous Ritholtz map

Let's see:
California 10 %GDP gain 9%
Texas 6% loss 9%
Florida, 6% gain 39%
New York 6% gain 0
Illinois 4% gain 56%
Virginia 4% loss 8%
Minnesota 3% loss 36%

Do the numbers.  Minnesota milk farmers do not support ten percent of the economy.

Zero Hedge has me laughing all day

Cross post from Raul Ilargi Meijer:
On Janet Yellen: If you’re a girl and you’re old and you’re grey and you’re the size of a hobbit, who’s going to get angry at you? If your predecessor had all the qualities anyone could look for in a garden gnome, and his predecessor was known mainly as a forward drooling incoherent oracle, how bad could it get? Think they select Fed heads them on purpose for how well they would fit into the Shire?

My take away from the article is simple, the Fed has become a habitual bunch of liars and that, in fact, is the first sign of monetary collapse.

I retire from physics

The mathematicians can figure it out.

Barry Ritholtz, liar and fraud

The guy is plain out fraudulent and seems to think it is OK. He posts a map of taxes paid and benefits received, on a state basis, for federal spending and the numbers do not even add to zero.  Somehow he has Minnesota and Delaware paying for most of the federal budget. He deliberately posts distorted data, and I am not even bothering with the link.  This guy is  worthless as an analyst.

The best numbers for this analysis still come from the 2005 Tax Foundation report.  But  they have not updated these number in a few years and a lot of very bad statistics are floating around, much of it reposted by Ezra Klein, another fraud.  Which states pays and which state receives is information not very popular with the DC crowd and the statisticians at the BLS and BEA tend to obscure the numbers needed to get at the analysis.

Zero Hedge is hilarious

He he is commenting on the market's reaction to key phrases in Yellen's speech.
ZeroHedge: Out of the gate - based on the fact the word "slack" was present and the word "bubble" was not, stocks ramped higher as J-Yell's J-Hole speech hit. Bond yields surged (led by 5Y) and the USDollar also surged (as gold shrugged). However, once the machines were done, humans reacted to the fact that this was not the "full dovish" speech that was 'priced in' and have started to sell stocks back... but then again - we always have Draghi later to save Friday...

Making money one one's own stupidity

Read this blurb from Market Watch.  The point is, too many bullish traders indicate a downturn. Now I have learned to bet against myself, since I am mostly wrong. So there must be some sort of uncertainty bias in us, something that tells us "Beware when you are so certain".
This old bull market is finally finding a little love as the S&P 500 SPX +0.30%  pushes yet again into record turf. Will it be its undoing?
The American Association of Individual Investors on Thursday said  46.11% of retail investors described themselves as bullish in their latest weekly survey, up from 39.81% the previous week and the highest reading since Dec. 26. The survey found 23.65% described themselves as bearish, down from 26.96% the previous week, marking the lowest reading since late June. Some 30.24% were “neutral,” down from 33.23% a week earlier.
The survey tends to serve as a contrarian indicator, so this is the sort of new high that might actually start to prompt some concern for market bulls. “While less than half of individual investors are bullish, we are getting close to that 50% threshold that has spelled short-term trouble in the past,” wrote analysts at Bespoke Investment Group, in a blog post.
–William Watts

Thursday, August 21, 2014

Krugman on the European secstags

Krugman: But it’s also true that structural change is happening fast — just not the kind of structural change people like to talk about. Never mind the stuff about skill mismatches and all that. What’s really happening fast is the demographic transition, with Europe very quickly turning Japanese.

So how does the a Keynesian stimulus help this problem?

Have I given up on the Six Californias project?

No, not really.  My problem with Six Californias is that the project is mostly about reforming the Senate in DC, and I am not sure California should take on that costly task. 

DC is hopelessly corrupt, mainly due to New Yawkers, and they are bankrupt.  Six Californias faces the daunting task of dealing with that DC crowd, but a simple exit from the DC system is swift and  sends a big message to the other regional economies. We would do more by getting out completely first, then that forces the other regional economies to get their act together.  Then we can re-establish the Federal system completely, if we want.  But the simple exit leaves California with options later.

The future of excess reserves

How long does the debt cartel keep these reserves? That is the question of the day. They exist so the cartel can cover the deficit expansion expected from existing government programs in DC. Taxes are volatile, middle class voters do not pay for the stuff they buy from DC. So a 3% hit to GDP can result in a 5% addition to deficit/GDP ratio real quickly. Just in the last wo years when DC finances were stable, the debt/GDP ratio varied by 4%. Deficit ratio to GDP varies by 6% over the recession cycle. We need 2.5% of GDP just to pay the interest bill, and we have not reached even that level with the deficit still at 4% of GDP. So over half of the new debt is used to cover interest expenses from past debt, and we are at the end of the business expansion, taxes have never really recovered.

Why are we in this state of affairs?  Mainly large states and the voters living there have no clue, information is masked by carpet baggers and scallywags.

Mish hammers Obamacare

Mish writes on Global Economic Trends and disects the recent Fed polling data on Obamacare costs. Here he abstracts the net cost to employment dynamics with the new law.

CategoryNet Percentage
Decrease Employment15.2
Increase Part-Time Workers16.7
Increase Outsourcing10.7
Increase prices28.8
Raise Healthcare Premiums 85.3
Raise Healthcare Deductibles91.2
Raise Out of Pocket Maximums73.6
Increase Copays61.8
Reduce Medical Coverage38.3
Decrease Network Choices26.5

Bad? Well is stops the employment gains for the rest of the year, so labor hiring has reached equilibrium.

Deranged Arab Islamic nutcases coming to attack!

Islamic State threat 'beyond anything we've seen': Pentagon

(Reuters) - The sophistication, wealth and military might of Islamic State militants pose a major threat to the United States that may surpass that from al Qaeda, U.S. military leaders said on Thursday.
"They are an imminent threat to every interest we have, whether it's in Iraq or anywhere else," Defense Secretary Chuck Hagel told reporters at the Pentagon about the militant group, which has seized a third of Iraq and released a video this week showing one of its fighters beheading an American hostage.

But it's OK, the pope in Rome says we can shoot them and still avoid time in Hell.

The puzzle of low rates, solved

The issue in a previous post was why the one year rate is too low to match the two year rate, yet the deposit rate on excess reserves matches quite well. The answer is a currency swap.

The only legal way the Fed can pay the New York debt cartel is thru the deposit on reserves.  So the debt cartel  have simply started using Treasury bills as cash in their trading accounts, and real cash is kept on reserve earning the higher, subsidized rate. So the real one year rate is .25, earned only by the Fed member banks on deposits, and the one year Treasury is traded like interest bearing cash.

Wednesday, August 20, 2014

Why does DC always end up with the ten year interest rate?

I have the ten year treasury rate and the effective federal rate. The effective federal rate is the current interest expenses divided by the total public debt.  I have scale factor to convert both to a proportion, (% value times 100).

But the maturity structure, the distribution of loans by term has changed from four years to six years, and varied in between.  Yet regardless, the market always assumes the government should pay the ten year rate.  Why? A new puzzle.

The possible answer is the 30 year mortgage rate for home loans is set to the ten year, and if that is a large part of the economy, that would set the peak of the distribution, other rates would be set in the -pLog(p) sense.  That number is 5% of the economy, not enough, it seems to me.

DC runs on the eight year recession cycle, but that is not all.  There is also the 30 year secular stagnation cycle, the cycle that is driving DC to bankruptcy.  The market may be charging DC the ten year rate to offset the cost of the secular stags it is causing.  This would be the extra fee the debt cartel charges treasury.  How often is the census? Every ten years. What happens at each census? Increased mal-proportionality in government flow, more inefficiency.

Eric Holder, you idiot

USA Today: "I am the Attorney General of the United States, but I am also a black man," Holder told Ferguson residents at a community meeting. "I can remember being stopped on the New Jersey turnpike on two occasions and accused of speeding. Pulled over. ... 'Let me search your car' ... Go through the trunk of my car, look under the seats and all this kind of stuff. I remember how humiliating that was and how angry I was and the impact it had on me."

I can remember, just the other day, a police raid on a house I was working on.  Guns drawn to my face, my hands up, and by god, I almost sold the house to one of the cops!.  I remember cops pulling into another house I was working on, looking for pot, five of them. One of them had some good gardening tips and complimented me on the patio. I remember how white I was, and still can remember the color of my skin.

I have had a cop follow me for miles, suspicious, then pull me over for a drunk test, (I do not drink). She was a lady cop, we chatted as I did the toe to toe, turns out we went to the same high school.

Eric Holder, you are a friggin racist and idiot, where did you get your law degree?

A partialy bad omen

The retailer cut its year end earnings forecast amid slack sales and losses from last year's data breach
 Target Corporation lowered its year end earnings forecast on Wednesday as the ailing retailer posted a 62% drop in second quarter profits.

Some of this was a one time loss from the theft of customer account info.  Some was slack sales and flat same store sales.  Mostly bad news and retail is a bell weather for the economy..

Obamacare costs, again

The Wall Street Journal: Risks Create Tumult for Tech, Health-Care Firms
Seismic shifts in the technology and health-care sectors highlight why executives are divided or undecided about taking financial and strategic risks. … At the opposite end of the spectrum is the health-care industry. The still-evolving Affordable Care Act, has made many companies hire thousands and plow millions into their businesses. The health-care sector is expected to post revenue growth of 12.2%, the highest of any sector, and earnings growth of 15.9%, second only to the telecommunications industry. Health-care companies increased spending on buildings and equipment by 15%, the greatest surge of any sector and compared with a 24% decline in the second quarter last year, according to FactSet (Knox and Murphy, 8/18).
Kaiser: Under the Affordable Care Act, the federal government pays 100 percent of the costs for newly eligible Medi-Cal enrollees for the first three years.
So, given that health care is 15% of the economy, the 12% revenue growth comes to 1.8% of GDP, paid for mostly with new federal debt.  Obamacare taxes will be a small part of the budget picture, most of the new enrollees are heavily subsidized. The expectation of a 3% deficit/GDP is gone, replaced with a 5% of deficit/GDP.  The increased capital gains tax is here now precisely to cash in on the expected higher interest rates.

Tuesday, August 19, 2014

I am still puzzled by this economy

Mainly the excess reserves and low yields for Treasuries.  The economy is still growing at 2.5% (YoY) , typically, the bean counters say. So why are the big banks happy to pile on the excess reserves at a .25% (YoY) deposit rate? It seems like an economy where banks do not even operate, all growth is coming from retained earnings. Who is lending money to DC at .1% (YoY) when the world growth is still 2% or greater? This is not the Fed, this is the lending market operating these low rates. Either the bean counters are mis-counting growth, or the risk premium of off the charts.  Something is not right with this economy.

O'Donnell, RBS Securities and welfare bum

In this Yahoo article the discussion is that low rates are the new normal. The Fed really is not going to raise rates because rates are dropping as we head into recession.  What rates are not dropping? The interest on excess reserves, the fee Congress pays to the bond dealers for sling some 15 Trillion in roll over debt from DC.  So what does RBS Securities have to say? They read right out of the Keynesian welfare manual and want more government debt.

For the Fed's Interest Rates, Low Is the New Status Quo

 And RBS Securities fixed-income strategist Bill O'Donnell argued that regulation's chastening effect has caused an overdependence on the Fed for financial liquidity. When that dries up, he said, "nobody really knows how the system will hold up under duress."
We shouldn't blame all this on overzealous regulators. Banks' prior excesses and the damage they wrought necessitated a regulatory response. The problem is that it exacerbated a difficult economic environment because fiscal policy makers had failed to devise more effective stimulus measures such as infrastructure-investment programs.

First, over dependence on the Fed for liquidity, OK we got that, the preipheral economy is breaking up.  The what does O'Donnell propose? More debt base spending from the center.  This idiot wants more bad effects from the causes he just described.  His empty brain must be rattling around.

Monday, August 18, 2014

Are we there yet?

How soon until the recession? I have current tax receipts for the federal government. They peak 2 to 6 months before the recession.  Have our tax receipts peaked yet? It looks like it, they are straight up, vertical.

Jerry Brown declares California independence

California governors sometimes even broach the topic of sovereignty. Example: On a July junket to Mexico City, Jerry Brown observed that  “Even though California is a mere sub-national entity, it is equivalent to the eighth largest country in the world and we intend to operate based on that…clout.”

          Brown referred to gross domestic product, where California ranks just behind Brazil and Russia, but is gaining on them, and well ahead of prominent nations like Italy, India, Mexico and Argentina.

Its hot in California

Bloomberg reporting on the worst drought in history.

Sunday, August 17, 2014

Where is the San Diego mayor during this fiasco?

Jim Hamilton, one of the smart economists, scorches a California municipal pension fund for a bonehead strategy. Read the blurb and have a feeling of Big Whoops this will end badly for Sane Diego taxpayers. Kevin Faulconer, the mayor, will lose his job when this crashes.
The unfunded liabilities of the San Diego County Employees Retirement Association have increased every year for the last five years, reaching $2.45 billion last year, more than quintuple the level in 2008. The calculation of how big the shortfall is assumes that the fund is going to be able to earn a 7.75% return on its investment after subtracting administrative costs. If it earns less than 7.75%, the shortfall will be even bigger. A 10-year Treasury bond currently pays 2.4%, and a typical stock has a dividend yield under 2%. So what do you do if you’re in charge of the system’s $10 billion in assets?

One thing you could do is ask the taxpayers for more money right now.
What the SDCERA board did instead was to approve a strategy that is supposed to increase the return on the fund’s assets.
And how do you do that, exactly? Suppose you invest $50,000 outright in the S&P 500. If the market goes up 1%, next year it will be worth $50,500, and you’ve earned 1% on your investment. (I’m going to ignore the role of dividends, which complicate a little the calculations I’m about to describe, but don’t change the basic story.)
Or you could use your $50,000 to cover the initial margin requirements for a couple of S&P 500 futures contracts, which would have a notional value of around a million dollars. That means that if the market goes up 1%, the notional value goes up to $1.01 million, and you get to keep all the $10,000 gain for yourself. That’s a 20% return on your initial $50,000 investment– not bad money in a ho-hum market!
Unfortunately, the downside is that if the market goes down 1% rather than up, you lose 20% on your investment. Oh well, what’s life without a little excitement?

Saturday, August 16, 2014

Stock market bubbles and crashes

I stole this chart. Is this market going to crash?  I suspect not, but it will become bear. I still have a hard time imagining a crash when we already are stuck in the mud. The only sudden crash I see would be a seriously underestimated Obamacare cost. But the market should have priced in a 1% GDP cost of Obamacare by now. So what will the real cost turn out to be? The actual cost of Medicaid expansion is still around 1.5%, from the numbers I have gathered. But that could go as high as 2.5% I am sure. So there is an uncertainty of about 1%, enough to cause a crash? I dunno.

Friday, August 15, 2014

Federal interest payments and crashes

The red line, federal interest payments and the blue, federal expenses.   The red line goes much higher than the blue line and we crash.  The red line got volatile during the last two crashes. It is much more volatile now than the last recession. And look, the red line just shot up by 35 billion, more than two jumps above it mean value.

We see in the last post, capital gains income jumps just before the crashes, it it has just jumped way above records. This economy is preparing to crash.

Thursday, August 14, 2014

Capital gains taxes and crashes

This is current tax receipts, but I checked them against income taxes only and it is pretty clear this is mostly capital gains. Notice they peak just before the grey bars. Not unusual, capital gains taxes drop when the market crashes. But we have a large peak this time, and that looks like a long fall.  Most of that capital gains are the very large players leaving the market.

Seems weird to me, and the excess reserves account at the Fed is piling up, just like this chart.  Why now?  Government debt is coming due, most likely.

federal Tax revenues

They peak just before the crash. I am guessing that the peak is due to capital gains tax being paid out as the asset bubble weakens.


The next president of DC.

Tuesday, August 12, 2014

So we are packing a big sphere

Why would the Lagrange numbers mark degrees of freedom? Are the possible exchanges by the vacuum bound by geometric lattice considerations?

The ratio, P/Q that defines the est Phi ratio for simple gaussian nulls is set by a change in bubble size, the exchanging vacuum elements alter curvature by optimizing bandwidth, assume they can change their relative size. By adjusting size and lengthening the recursive order, they get twice the possible exchanges. A gain from quantization. That gain would be represented by look back for any of the constituents looking for exchange. Geometrically there must be another degree of symmetry in the ideal arrangement.

When the vacuum exchange constituents adapt, the spectrum of exchange is optimally matched to the spectrum of the unit circle. Noise is a maximally orthogonal group of one order above the unit circle. So the simple gaussian balls have square motion separating their probability of appearance. In a curved space, these fuzzys collide causing a sampling error, and putting spheres out of place. The disruptive noise cause a unstable change in the spectrum of motion, and the vacuum constituents change shape to quantize, and it has trapped the second degree of motion. That is how they do the finite log.

Under the pressure of vacuum curvature, collisions cause mixing of degree two quants.  With the current degrees of freedom, the unit sphere is shaped to avoid lower order emissions. So the mixing skips the missing quant levels and shifts the chain back once again, increasing the polynomial degree to level three for noise. The wave constituents add another dimension to unit sphere curvature, and in the process, lock in a cube root.

So that makes the unit sphere adding up the finite log from the high frequency to one, and kinetic motion adding up to the  rest from one to the lowest frequency.

Bandlimited exchange rate:
That means all exchanges are locally determined, up to some degree of reach. If the process is locally additive then they can be treated as exponents. Exponents are quantized because of the  band limit of the exchange and minimum redundancy.

So I find this, Vector Hyperbolic Equations which finds the set of third order polynomials on the sphere.  Not I am stuck reading, but I want the integer solutions.

Round two for Obamacare

John Cochrane: An intriguing news item, University of Chicago's Plan to Add 43 Hospital Beds Quashed by the State by Sam Cholke about the University of Chicago's attempt to expand its hospital. And one more of today's costs-of-regulations anectodes.

In researching "After the ACA" about supply-side restrictions in medicine and health insurance, I became aware of CON ("certificate of need") laws. Yes, to expand or build a new hospital, in many states, you need state approval, and those proceedings are predictably hijacked politically. For once, they came up with an unintentionally appropriate acronym.
Take this problem and triple it and that is California soon. Cook County, an early implementer of Obamacare has found many of these costs already.

Monday, August 11, 2014

Sphere packing with three sizes, more thinking

The universe want to make the perfect sphere and has only three vacuum bubble sizes. We know we will be quantized. We know the ratio of large to small sphere is even around the radial line. We assume Efimov like exchanges, the large and small exchanging with the middle only. Exchanges are local to a third degree. Three sphere everywhere, small, medium and inert, and large.

Spheres are quantized in groups of similar size, and that seems to be an units with exponent of 17 for the proton. The total sphere has kinetic energy characterize by the frequency with which a unit sphere of Nulls can be counted. Counted means appearing at some location where a deficit of small or large appear. So the unit motion is kinetic energy and is a frequency variable over the degrees of freedom. Degrees of freedom come from the polynomial root. In the center we expect one dominate size, large or small dependent on the vacuum curvature. Null quants have the higher exponent, relative to small/large, in the center. There is a third degree shift in the recursive wave quantization sums. Why 17? Minimum transaction counting, optimum distribution of degrees of freedom.  The compact center, high frequency, narrow spectrum, high mass.  Toward the exterior, quants have lower mass and low frequency spectrum.

Compton match occurs when the Null quant and Wave quants are more equivalent, more often the available exchanges of the wave is less than the null spectrum of the unit sphere, so the sphere holds position. At that point there is a Lagrange limit. There is no better match better than P/Q, being the ratio on Null and Wave spectrum. The P/Q ratio changes when the next degrees of freedom are optimal, going from exterior to interior.

When toilet paper is wrth more than the one year

Then storage space becomes valuable:
Yahoo: The number one alternative investment according to Bloomberg Markets is … storage space. Yes, you read that correctly.
According to the magazine’s annual ranking of alternative and exotic investments, storage units (specifically storage facility REITs) have been having a great few years.
Storage REITs such as Extra Space (EXR), Public Storage (PSA), CubeSmart (CUBE) and Sovran Self Storage (SSS) have seen gains between 142% and 483% in the past five years. Storage as a category has returned 101% from 2008 through 2011, outperforming all other REIT categories. There are now 52,000 storage properties in the United States, up from just under 20,000 in 1990. Nearly 11 million Americans rent storage units each year.

Are We There Yet?

That would be the Federal Reserve, Atlanta assessing the Fed policy objectives. Read with care, they assume a cause and effect that is not all there. They say: "Close but no cigar".

My version of 'Are we there?':

Are the taxpayers done subsidizing the New York bond cartel to the tune of $220 billion a year.

Sunday, August 10, 2014

Hillary Clinton, liar and incompetent

Here Hillary disagrees with Obama, and Obama seems to have it right. Trying to oust Bashar Assad from Syria and install a moderate regime was a huge waste of time, as was the attempt to instil democracy in Egypt. All of that nonsense left room for a bunch is Al Queda genocidal killers to run rampant. Hillary is clearly a liar and incompetent to be president of the Swampland back East.
Atlantic: President Obama has long ridiculed the idea that the U.S., early in the Syrian civil war, could have shaped the forces fighting the Assad regime, thereby stopping al Qaeda-inspired groups—like the one rampaging across Syria and Iraq today—from seizing control of the rebellion. In an interview in February, the president told me that “when you have a professional army ... fighting against a farmer, a carpenter, an engineer who started out as protesters and suddenly now see themselves in the midst of a civil conflict—the notion that we could have, in a clean way that didn’t commit U.S. military forces, changed the equation on the ground there was never true.”
Well, his former secretary of state, Hillary Rodham Clinton, isn’t buying it. In an interview with me earlier this week, she used her sharpest language yet to describe the "failure" that resulted from the decision to keep the U.S. on the sidelines during the first phase of the Syrian uprising.

So how bad is the rate rigging scandal in DC right now?

The German government can borrow over ten years and pay 1.05%, while the US government pays some 2.5%.  The German growth rate is 2.5-3% while the US growth rates is around 2%.

In other words, the politicians in DC, mostly Charles Schumer, Jack Lew, Obama, Janet Yellen and the Democrats, have rigged the rates to nearly double costing tax payers some $200 billion a year. Who gains? This rigging runs up the stock market, most Senators get free insider trading immunity and all are guided by the rate rigging.  They are all assigned an investment manager from one of the several banks involved in the scheme.

Democrats have fouled their own pants

USA Today: The non-partisan Cook Political Report ranks just 16 of those districts, 13 held by Democrats and three by Republicans, as competitive enough that neither party has a clear advantage with fewer than 100 days to go before Election Day.
The current House makeup includes 234 Republicans and 199 Democrats, and there are two vacant seats that are safely Democratic. That means Democrats need a net gain of 17 seats for a takeover. They'd have to pick up 17 Republican seats and lose none of their own, or make even greater gains in GOP territory to make up for any losses.
Who is to blame?  Over half of Americans consider Obama the worst post war president, over half dislike Obamacare, and 80% of us think DC is a bankrupt, corrupt wasteland. 

Saturday, August 9, 2014

The Dean Baker and Jared Bernstein show at the WA Post

A couple of confused economists talking about the fear the Fed might raise rates.
WA Post: As predictable as August vacations, numerous economists and Federal Reserve watchers are arguing that the nation’s central bank must raise interest rates or risk an outbreak of spiraling inflation.

Now the effective overnight rate is .1, that is the market rate. What is the target?
From the Wall Street Week:
With its bond-buying program winding down and the job market on the mend, sometime next year the Fed will likely raise its target on the federal-funds rate from the zero-to-0.25% range it has kept it in since late 2008.

So we have these two characters, Jared Bernstein and Dean Baker worrying about the Fed raising its overnight rate.  But it is already higher than the market rate! What are these two nutheads talking about?  The Fed pays big banks .25% on deposits, more than the market.  These two bozos should be complaining about that, because that has rigged the entire yield curve forcing taxpayers to over pay on rates.

Here is the WSJ again:
But as a result of the huge Treasury and mortgage-buying programs the Fed kicked off during the financial crisis, bank reserves in excess of what they are required to hold have swollen by more than $2.5 trillion. With so much liquidity in the system, setting a target for the federal-funds rate, and then using open-market operations to adjust reserves until that goal is hit, isn't tenable.

In other words, the Fed cannot raise rates that are already above the market. If bernstein and Baker should complain that rates are too high.  The curve, in fact, is inverted with overnight deposits earning more than the yearly one year treasury note.  The Treasury has kept the economy in near recession for six friggin years.  The Fed does not set rates, the Too Big To Fail banks set rates.  Fed officials simply recite bizarre poetry.

Demand or supply shock?

How does supply make money? Buy stuff and sell it. So lets try looking at the sales price  minus the cost of inputs, consumer prices minus producer prices. When that number is high, suppliers are doing well. When that number plunges, suppliers are losing money.

See the blue line? What does it do just before the crash? It plunges. And it plunges straight down when the oil price jumped to $140 just before the crash.  Transportation costs went through the roof, and that is a supply shock.  Trucking stopped cold, here in California and all over the world. Keynesians are still flogging this issue, but they are simply being fraudulent jackasses. We had a supply shock.

Rigging Treasury rates by the New York banks

I am getting into some detail about how the treasury sales network managed to rig the entire yield curve; costing the taxpayer some 150 billion a year.  Let us start with this chart.  We have two lines, and oddly they match.  The blue line iare the excess reserves placed on deposit by large private banks who are reserve memebers.  Also I have the red line which is the amount of treasury notes and bond purchased by the Federal reserve itself during the QE.  Notice they match.  The private member banks earn some .25% on those reserves. Who are these bankers?

Treasury Advisory Committee:

You can see many of them on the Treasury advisory committee. That committee actualy advises the Treasury on what notes and bonds to buy and in what quantitites.  On the committee we see Morgan  Stanley, PIMCO, Credit Suisse, Blackrock, JP Morgan and Goldman Sachs, naturally, Citigroup and Bank of America; plus a few others.

Primary dealers:

And we have the primary dealers who take treasury issued bonds and notes directly and provide the sales network. Who are they? The Fed has a list.

Bank of Nova Scotia, New York Agency,BMO Capital Markets Corp.,BNP Paribas Securities Corp.,Barclays Capital Inc.
Cantor Fitzgerald & Co.,Citigroup Global Markets Inc.,Credit Suisse Securities (USA) LLC,Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.,Goldman, Sachs & Co.
HSBC Securities (USA) Inc.,Jefferies LLC
J.P. Morgan Securities LLC,Merrill Lynch, Pierce, Fenner & Smith Incorporated Mizuho Securities USA Inc.,Morgan Stanley & Co. LLC
Nomura Securities International, Inc., RBC Capital Markets, LLC
RBS Securities Inc.,SG Americas Securities, LLC,TD Securities (USA) LLC,UBS Securities LLC.

I have boldfaced the banks who sit in both groups.  All of the boldface banks are also members banks of the fed.  These banks get twice the market value on the deposits that is offered on the market, and as you can see from the chart, whenever the Fed buys a security, these bankers sell and deposit the proceeds in their higher priced Fed account. That account yield, .25 is about twice the market over night rate or .12, generally.

Portfolio theory:

These banks set their entire portfolio, (short to long  holdings) to match the maximum gain  they set the portfolio to the,25% yearly rates guaranteed by the Fed.  Any long term holdings of Treasuries will be a compound rate from the short rate they get from the Fed.  But since they both advise the Fed, and are the wholesalers of Fed securities that can guarantee that their portfolio network ensures equalized gains across the spectrum, equalized by compound interest.  They make the maximum total amount dictated by their special rate on deposits. They make a finite log trading network!

They have one other advantage:
They know exactly when the Treasury will have to roll over huge amounts of debt, and they have large investments in the stock market. Here we see that the Fed purchases of treasuries from the market match the SP500 stock price, just like they match the excess reserves.  So the rate rigging scheme involves the stock and bonds both.

They have a large control over the presidential recession cycle, and with their close eye and control over Treasury borrowings, they know exactly when the debt bulge is coming.  That is the moment now, treasury is having a hard time paying the interest, and liquidity is rising as these banks know the point in the cycle for large yield capture has come. 

How much to they skim?

Well, to a first approximation they double their return from what the free market would guarantee. But this is an over statement because the -pLog(p) is not linear.  More than likely, the US taxpayer is on the hook for about $150 billion a year more than need be, or nearly a trillion over the since years this skimming game has been going on.

Why doesn't treasury just flood the market with one year notes?

That is the part I am working on, I do not quite get it.  Two possibilities, Jack Lew the secretary of treasury is an idiot or he is in on the game.  Treasury may just be intimidated. The advisory committee advised recently advised them not to do that but to acquire an additional cash balance of %500 billion by selling longer term notes.  The large banks are likely threatening to break the economy if the Treasury drives short term rates up. The main effect would be to crash the stock market, and that means crooked Senators, like Schumer of New York, will want a warning. This whole mess is actually one of the biggest scandals in US government history.