Saturday, April 8, 2017

Inflation adjustment, an example of Magic Walrus disaster

It is a price fix. Consider it a fix that sets the consumption basket as fixed size for seniors, one third of us.  So, a supply shock, then youngsters pay their own higher price, then pay the seniors higher price. The pricing orbit spirals, normally called negative feedback.

So, the response is to specialize and bulk up the senior inventories. That means send them to Florida or Arizona. The federal price fixing causes specialization, especially among the large states; a point made over and over. No matter how the economy, those inflation adjusted checks must go from Chicago to Florida; either the federal or state path. Then all the government flows tend to bulk up to match the large states, each one thus being decorrelated from the price fixing loops (the loop gets closed).  Instead we get alternation of flows in government goods, mainly Texas then California then New York.  Inflation is kept closer to zero but price distortion goes off scale.

What about the sandbox?

We ate going to be a problem for the legislatures, they will have to go and remove all, or greatly reduce the price fixes everywhere.  Given the ability of block chain to track actual goods, then the ability of sandbox to kill all hedges, then the legislatures are in a tough spot.  Auto-pilot price fixing is no longer going to work.

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