Thursday, January 15, 2015

Term length, not money quantity is the fiat target

This is where the economists make a mistake.  The moment the fiat banker needs to reset rates is when the fiat banker knows the economy has settled.  That time, the time for the economy to settle sets the short term length, or the term period for the short end in the fiat bankers yield curve.

Basically, all the fiat banker has to do is set savings and lending rates, for the term period, such that his accounts balance and there is a net flow of paper out the door that will clear his accounts and cover variance in his signal.    In other words, its even simpler then even I thought, the fiat banker is simply adding and subtracting.  The key is for her to figure out the add and subtract term period.

Of course, in the good old USA  the settling time is somewhere between 8 and 30 years because bonehead politicians are interfering with the fiat function. In Switzerland, the settling time is about two months. But making a broken fiat model, as we do in the USA, does not really change the basic function, the discovery of the fundamental bandwidth of the economy.

No comments: