In favor of a Fed transaction tax

The unsolved problem of central banking is paying Congress for the right to coin.  Central bankers need to buy their independence to properly manage the tax dollar.  The tax dollar is a monopoly, needed on occasion by everyone, there is a workable price to buy the right to coin.

Get Congress to agree to a transaction tax of some significance. Large enough that they prefer to leave it alone.  Then the Fed is free, but holds a monopoly on the tax dollar.  The Fed can focus on one problem, getting a representative sample, or aggregate thereof, on its account ledger to manage interest swaps.

What is significant for Congress? 60 billion/yr; 10% of their interest charges, a fixed flat fee, good for 15 years.

The Fed's real job, looking at its struggles, has been about getting a representative sample, so it does not get blind sided again.   This is the prequal problem, attracting a risk equalized representative sample. The harder problem to solve.

The actual interest swaps are your standard double sided option play, a spreadsheet function. The Rule, as everyone is harping about. Everyone is correct, the line of symmetry for betting loans to deposits must be contracted by law. That Rule will be an algorithm, of the simplest needed, if accounts are risk equalized via congestion fee.

But there is your source of 'patent fee', the congestion fee.

But, there is another source of containment for the right to coin. Giving the Fed the contract to default eight trillion over 15 years.  That would be difficult for Congress to give up, once signed.  The difference is a patent fee versus purchase of the right. Combine them, the eight trillion in default is past due and the sooner we declare it the better. Then the flat fee generates another layer of independence.

The result has its Coase solution because everything here is endogenous.  The transaction fee and default, whatever it is, will be offset by the structure of other taxes anyway.  There are more than one solution, we can commute much better, we operate at a better liquiditiy point with less volatility.