The New Zealand reserve bank and the corridor system

Wiki: The mechanism of this is the Official Cash Rate (a percentage) which affects short-term interest rates. The Bank will provide cash overnight at 0.50% above the cash rate to Banks against good security with no limit. Furthermore the bank will accept deposits from financial institutions with interest usually at the official cash rate.

It has a corridor system, but lends at a rate greater than is oays on deposits, by .5%.  Does that work? Here are rates and inflation.

We see that rates were higher in 2005 thru 2008. Inflation was around 3% and volatile. But after the crash, inflation was still volatile even though rates were low.  It was not until 2012 that inflation settles down.

So what's the deal? The lending rate is always a 1/2 point above the savings rate. That is hardly a tuning variable.

And do not confuse consumer price inflation with inflation, inflation is all prices, the implicit price deflator. When CPI is high is usually means producers have jacked up prices.

So, let the terms vary. Raising the lending rate farther above the deposit rate selects borrowers who need longer term money.

Second, when the fiat banker loses money on the two, it is inflationary, when if gains money on the two is is deflationary. When its losses-gains match the economic growth, it is price neutral. The term length should adjust automatically.

Our Federal reserve is way out of balance since its lending balances, some 4T, have a term length of about 6 years.  But its deposit balances have a term length of about 18 months.  The term length of the deposit balance is determined by looking as the variability in flow.

The other thing broken in our system is that politicians take all the gains, minus expenses.  Hence the Federal Reserve is hobbled and any monetary regime will ultimately result in deflation.  The system simply applies a tax on the bond market because Congress is an unfair player.  There has been no new cash into the system since 1988, as near as I can tell.  We have simply been causing consolidation in the bond market via an implicit tax.

But wait, you say, when the fiat banker loses money don;t the member banks get a good deal?  Yes, but that means two things, 1) you have growth so the member banks are doing a good job, and 2) You should have more member banks.