ISisms and Elems

Let us return to our IS/LM chart.  I think my current version looks like this:

The Y axis are current interest charges, higher going up.
The X axis is the indexing axis chosen.

Now, instead of IS, I have S/L; savings to loans.  Deposits and Loans  will tend to track, stay within a bound if the market maker is finite bound.

As interest charges drop, S/L tend to one, deposits and loans match. The curves slopes downward because tending toward equilibrium moves to the right on the X axis.

The right side curve is derivative of S/L, its slope relative to the X axis. The second curve tends to one going left, curves down left.  It is the interest charges almost swapped.  So as S/L tend to 1.0, (right on the X axis)  interest charges drop toward zero and derivative S/L goes to 0, slopes upward). The two intersect when S and L are most liquid, that is when the second delta is maximum. Maximizing the second delta is like whitening the fixed channel, rounding the tree trunk.

As a probability space, the system will find solutions about the optimum, always trying to get the best finite approximation to the optimum ratio.  Or the market maker trying to take the nearest trades that get the market risk back toward zero.

It works this way because markets and people  suffer the inherent uncertainty of serialization. So consumers and producers have to keep space in their baskets, excess capacity in their distribution. That risk is allocated by a quantizing basket, and that basket vacancy ratio represents the standard bit error in an equal risk set of agents. Uncertainty quantizes, flow maintains the quants. The tree trunk never perfectly round.

Semi stable, it take energy to maintain equilibrium, the interest charges have to flow.