Rethink Ricardo

Do individual agents in the economy anticipate higher taxes upon fiscal stimulus?  Economists can do better.

In our case, individual agents are expecting the usual 25 year entitlement update.

Agents are expecting a transaction between the overlapping generations in Congress, update the entitlements to the demographics; a mark to market.  Until that happens, the current natural rate is unknown and interest rate risk is rising.

Failure to do a demographic update to entitlements effects pensions in general since future liabilities are yet to be determined.

Proof:

1) The economist model is assumed to work, therefore it is spectrally consistent.
2) We know the spectrum, it's the yield curve where we find five ranges of motion, the two year, five year, ten year and thirty year.
3) Since this spectrum is very sparse we expect large volatile transactions on cycle boundaries.

From then on is a matter of matching motion to sectors; namely housing and entitlements have the 30 year motion.  It is time for government(s) to mark to market.  Once we have an update, then they will take gains and losses, as incurred in the past.  These would namely be mis-calculations on the price of retirement, mis-calculations mainly due to the sparse spectra, price discovery becomes rapidly more uncertain as the update is delayed..