Tuesday, March 29, 2016

OK, I interpret Yellen

She says data dependent. She really means:

The currency banker holds until the deposit and loan queues imply a liquidity demand beyond a published bounds.  The currency banker then pays the bets, and the interest rate and term for the previous period is determined, ex post.  There is no other outcome for the currency banker then determining the immediate past.  The most immediate information the currency banker has is what the member banks just did.  At some points economic dynamics force an unsustainable spread in the bets, and the currency banker closes bets on the members, like a call in poker.  On the margin, loose change flows to and from the 'house' to the members.  A member bank wins the bet by finding the most likely trends in the economy, and funds (or unfunds)  portions of the distribution chain.  Members whose savings to loans more closely march the typical consumer to surplus real goods win.  Those members  most closely matched any innovations in the flow of real goods.

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