Thursday, December 15, 2016

Let's try crude grouping on the Fed issue

Let's pretend we are kids with blocks, and no nothing about banking, except someone give us the current balance sheet, in blocks.  We have 30 red blocks, the member bankers, all on deposit; and he two or three green blocks.  I say two or three because the loan book arrived in two or three steps, over eight years.

No, yhe problem is for the depositors to rotate through the borrower, and get a bit of a goodie from.  But most of the red blocks have to ge a good share of their goodies so they exist the queue.  once hey exit the queue, they can form a goodie reseller market and suddenly the queue is unjammed. It is like a puzzle, get he first forty pieces fitting, then matching suddenly becomes easier.

How long in units of time> Congress makes a transaction every two yrears, we have to get a random arrangment of red blocks out that 15 of them had random, positive suplus in each of their turns at the queue,

We can see that we have hundreds of years to wait, just by using this broad look at the balance sheet. On  closer look at he books we can see he lending and depositing are a bit more balanced, the matched by probability of a bid or ask.  That is, we can see a group of large, hard to match bids; and a whole bunch more of tiny bids/ask east to match.   Not so on the Fed balance sheet, there is little diversity and it has devolved into the entire banking network focused on making congressional interest payments. Bankers make a living by constantly write_a_letter_to_janet().

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