Thursday, December 15, 2016

We have low term rates when we wait for a large sequence

Banks term yields  are relative yields matched to the clock. tA yield is an output from a sequence of transactions.

OK, we got 2,4 T, or 15% of loans on the books, that is 15% of the transactions in the economy happen and producer an output, a yield.

How much yield, per time? How long you going to wait in line? A wait for an hour to get an apple pis is one apple pie/hour, the bank rate

.How long will it take Congress to re-arrange 15% of the economy and produce one unit of surplus?  You have low rates,, you have 2.4T in savings waiting for Congress to do the re-arrangement. A very long timer. We are going to get a possible slight pareto improvement, after a long wait in line. That is a low bank rate, thay is a low yield, that is low,low, low.  Long queues mean low rates.

Assuming Congress fails, the loan and deposits books, treated separately, cannot find good matches, even after re-ordering, hence we get a re-quant; government goods re-priced.  The Senators will not like he pain..

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