How are the lifeboats?

Market down this day by  2.4%, still dropping.  The ten year yield is managing 1.67%, a significant jump from the lower bound, 1.5%.  The Fed has been buying a lot of short term treasuries trying to bring the one year down, it is at .56, above target.

The Fed is selling long term treasuries.  But, it is the election year insanity that makes the Congressional budgeting illiquid, and that is driving short term borrowing costs.

But, ultimately we hit the upper bound on the ten year, 2.5%, a jump in interest expense that shuts down government.  All of this is a semi-random, finite, repeating sequence, the typical, completer transaction set, the compressed representation of the economy.

Congress leaves itself with no reserves in the short term, and here we see the Fed has reached its limits.   The Fed transaction window now includes the elements of a 50 year monetary cycle, ahowing up as a continual rollover of past bailout debt. . It cannot drive up the ten year yield using twist, as that shuts down the Swamp.  It can expand its balance sheet, leaving it even less flexible, or we get the sudden helicopter and pricing chaos for ten years.

Why the horror show?

Political information channels are extremely skewed and voters in the key states of New York, California, and Texas miss much of the significant budget changes in DC.  So we have politicians promising a future way out of balance.  In particular, California asymmetrically skews the government flow, Congress cannot handle it, the Dems cannot even budge on any issue until the California unions agree and Congress gets the nod from Jerry.  Ditto for Republicans and Texas.


The fix is to re-proportionalize the voting flow and that makes the program update rates match program depreciation schedules.  Once the state system realligns, government goods flow,program  depreciation schedules, debt and votes all match, within known error. But the aside effects and hidden agendas   fall directly back onto the voter, and the voter must correct, or see the debt costs immediately.  His vote gets marked to results most efficiently.