The red line, the one year rate, we call that current interest charges, and the green, short term treasuries held, we call the Treasury cash in advance borrowings.
A few points, from 2012 to 2015, interest charges were as low as possible yet Treasury hardly took cash in advance. A stupidity which was well noticed by everyone, including Summers, the previous secretary of treasury.
Prior to the crash, interest charges were up, consistently, yet Treasury kept its existing short term borrowings, Treasury is not responding to interest charges. It finally began to stop borrowing just before the crash, but interest charges were already falling.
In other words, treat Treasury as a member bnnk and most ot the errors are explained as horrible accounting. The real error is the implicit, the Fed only sees that is six months late, at best, and that is the only valid inflation indicator, the separator between real and inflationary growth. The correct target is the current distribution of deposits vs cash in advance, two color matched. Start there, that is the minimal state machine we need. I
It really is Treasury that needs to be honest. Treasury is actually honest, this is came up in House hearings, and was publicly discussed. There is no corrective theory, not theory that makes government a special borrower. Whatever excuse made, the fact remains, bad Treasury policy makes the Fed look six months late. So if fiscal policy is the real target, then put Treasury in charge and replace the Fed with S&L spreadsheet function. Or better yet, just download the standard S&L auto-pit, hit go.
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