A 'right to coin' cycle

Note that the green and red lines are diverging? Deposits dropping much faster than loans.

The Fed is supposed to keep these two merging in theory, but the loan side is a two step.  Those government loans in green are not made by government entities, they are made by the Fed. Further the local sign is backwards, when deposits drop, suddenly, government gets an implicit interest charge cut, due to the remits back to Treasury.  So, it is a two step process, not a one step. The Fed thus spectraly limited relative to any money market not so restricted.  The cycle is caused by the inherent 'catching up' the second step requires at turning points.

Effectively any economist who attempts to take direct counter cyclical policy here will make the cycle worse, 'Right to coin ' is endogenous.  We are bound to pack that spectral limit somewhere. The only solution is to schedule our right to coin by contract, as unfortunate as the solution is.  The problem is eventually eliminated by technology, the ability to auto hedge the right to coin will be built in everywhere,  for fiat currencies. But not now, not today, we can only do better cycles.