Friday, March 31, 2017

Inflation and rates in the new

Raise Rates to Raise Inflation

What happens to prices when rates change?  I get confused about these debates because each party has a different measure of prices.  So, let's just go straight to the sandbox version.

What are price in the sandbox?

They are a containerized algebra made of prime units of 'basket fullnes'.  Supply and demand are met when are baskets are appropriately full, none empty, none overflow. Sandbox S&L technology makes this so when it enforced asynchronous, adjustable rate charges and earning; which it does when the basket fullness measure, the bit error, is out of bounds.  The bankers are happy when I almost always buy something from my basket, and most never let anything fall out. Then it knows change in the economy is adiabatic, i a not swapping out the basket on my bike.
In the sandbox, coins are conserved and the bit error is rally a statistical generator with know properties, everyone knows how much loose change is floating around. Prices orbit along a semi-repeatable path.

So, going back to the old model, what is inflation?  Consumers have too large of a basket, the S&L hardly sees the overflow and has no idea what the basket sizes are.  The store queues are longer.  The best we can do is 0 or 1 queued up at the input docks, and 1 or 2 queued up and the output dock.  That gives enough 'free each and entry' so the banks can signal the typical basket sizes with minimal uncertainty.  So, since coins atre conserved, total prices never have rally changed since the Nixon shock, that was the last time the bit error blew up.  Prices are simply going through this huge orbit, a round about orbit.  So we see consumers suffering high home price from a huge global trade orbit, medical prices rise because of the huge government orbit and consumer stables in actual deflation.

A fed over reach problem
The consumer has to carry a large basket, enough to cover all those federal programs and the long turn around on foreign account balancing. Hence the generational default, the death sequence is shorter than the orbital sequence.  It is insolvable, it is hundred of years before all the price orbit run their course. Hence the true monetary stimulus, get more of the sandbox up and running.

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