Thursday, April 4, 2019

A targeted accounting identity

 MV=PY

The classic money equation.

The Walmart manager counts up purchases per customer per day.  That is Money times Velocity, MV.

Then she counts  price * quantity on a per product basis, how much from each department at its current price.

The two will match, within a small bound.    This equation is the target, in particular, velocity.  And price is the independent variable, the merchant= sets price to make a break even, and if the velocity is not sufficient, the merchant closes checkout counters.

The guiding principle that makes velocity stable is the plastic card, we can swipe a loan when the line is short for some goodies, and swipe a deposit to pass the longer lines by.  When the currency banker keeps the swiping balanced, it forces velocity to stabilize because supply tends toward demand, all the queues become stable, the ISLM curve is apparent, folks know where they are on the liquidity curve.

So, everyone has the single line of symmetry to measure relative position, the S?L ratio, and it works to some observed bound.  We get the Hologram effect, MV=PY works because ratios work, the currency banker done its job by asynchronously balancing in and out card swipes.

The bounder error comes in because of the inherent uncertainty in waiting for the ledger services. The ledger service is really the collapsed symmetry of measurement. Change the uncertainty in the Lindbadian equation, the TOE.  The uncertainty in currency banker is how soon can the pit boss read the board, and set interest swaps. 

The Lindbladian is simplified because implementing the imaginary hologram axis becomes a pattern matching and order shifting problem at these high uncertainties.  The imaginary part becomes the 'market making' function, all about keeping the pit organized to its natural algebra.  Algebra meaning traders who use something like MV=PY.

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