The shortest term interest rate is determined by the Krugman agglomeration

Somebody accidentally got the Nobel prize for re-discovering Shannon theorem. To wit: A Krugman agglomeration is the ability to subdivide goods and deliver smaller quantities of varying goods at higher transaction rates. In other words, what is the smallest profitable transaction we can accomplish. That transaction rate determines the shortest term at which banks are willing to lend. This theory is also known as PSST.

The shortest term we currently have is about three years, lemme check that using the Treasury curve as a proxy. No, it is about one year, normally it is about 3 months, sometimes shorter. The rest of the transactions go as -iLog(i), and this was well proven by agglomeration theory, in 1940. The economy encodes the packaging of goods according to Benford's Law,as Benford's law is the maximum entropy encoding of a delivery channel, as per a Shannon agglomeration. Benford's law deliveries goods with the smallest number of steps (This is how PSST is measured Arnold Kling), from wholesale down to retail.

The shortest transaction rates are down, people buy groceries less often and in larger quantities. What happened? Oil is in short supply. There is no liquidity preference going on, there is no risk aversion, there is an economy adapted to a shorter bandwidth, all inventories are a bit higher, and all transaction are a bit larger and occur less often. The supply chain had reduced rank. This is all agglomeration, PSST, channel encoding, folks.

Are we less accurate today than yesterday? You bet, and when the channel can support the higher rates, the entire channel will re-adapt to the higher signal to noise. Channel Theory.

What really pisses me off is that this was all well known in 1940, Samuelson knew all about this. But for some reason economists got their value religion thing going and forgot everything they learned in 1940. That left me to work from bogus Jeynes theory, work all the backwards through the math, taking each and every fucking reverse step until I reached Shannon. There I discover this was well knwon, deliberately hidden by corrupt economists.

What does this say about stimulus? If you want have stimulus than agglomeration theory says the congressional earmark is the way to go. The Congressional district is the most accurate, highest bandwidth 'bin' of transaction available to the Congress. Why don't we do Congressional earmarks? Senate distortion. The variety of transaction needed by the variable state representation means the smallest transaction rate is not available to the Senate. The Senate only operates over a longer cycle, otherwise it does not operate. The lack of fair voting in the Senate limits our response to a crisis folks.

I remember bitching about Samuelson, he should have pursued this, then the guy up and died on me. But Samuelson knew the scoop. Channel theory is also Hayek's roundabout theory, Hayek should have listened to Shannon, dunno why he didn't.