I model the financial system as a queue with direction flow. It suffered a bout of inflation, true, characterized by an attempt to add more term points than certainty would allow. All the sectors have a term structure, a yields curve representing inventory changes over directional flows. But inflation should always be a constraint and we would see distortions in the yield of the constrained sector. The financial yield curve is the one we always look at, and it is the fastest adapter, the money term structure. By the time we, the general observer, finds something new in the real economy as a whole, the money yield should have already adjusted.
If I go back to April 11, 2008 on my Universal Economic Calculator, I see a yield curve that looks in better shape than the one we have now. The stock market crash followed shortly. Except the short in is very fuzzy. I go to Frequently Used Charts and look at chart one showing oil vs ten year yield, the two curves had begun tracking, oil had slipped past a breaking point and had become the constraint.
The financial system was doing a good job and had begun tracking the constraint. This is what we like finance to do, adjust the yield curve to represent the average, but normalized yields of all sectors, weighted by economic share. Oil had simply become the constraint, so the yield curve more closely represents the flow of oil, over time, in a finite distributio network.
If the oil network was some how non-standard, then that brings up other issues, but the finance system performed OK.
So which sector missed the boat on the oil constraint? Local metropolitan government. They should have been looking for and pressing for newer, low infrastructure, systems for local transportation. Local districts should now be putting energy efficiency in transportation as their top priority, using computer intelligence to remove inefficiencies at every step of the way, on asphalt.
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