Friday, October 7, 2011

IS/LM as a channel

I go with Brad's description, what are he three goods? Real goods, money, and bonds. The channel hypothesis is that real goods have distinct equilibrium points, they have spectral lines.  his is due to the need to quantize flow to  minimize redundant steps.  So, a shock that drops the quantized rank will appear to crash when measured on money.  Monetary accounting is accounting simplified by the Markov model assumptions.

So, the real goods channel had shortened its supply lines,  and caused a large drop in velocity, the economic bandwidth dropped from six months to a year, the two years.  That surprised the money plumbers and you can see they crowded into a collapsed yield curve a few times during the crash.

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