Sunday, May 12, 2019

I will take this question

I've asked this before. In a more robust competitive economy, no Fed, no tariffs and 15% flat tax, would MV=PY? I assume savings will supply capital and investors will demand capital with the equilibrium price equal to the market interest rate.
MV=PY will be a bit elliptic.  The conditions implied are equilibrium with government pricing at a narrow bound, a narrower bound than any currency function.  Hence, a derivatives industry will be built that finds a long term hedge for government constraints as best it can, an axis of symmetry to make government in and outs better match against the price fixing.

The result will, as per assumption, still result in the hologram effect, but the tree trunk is more elliptical and the branches and roots form an ellipsoid.  The generator will be skewed, the amount of channel space for government restricted, it will suffer the most skew.  The consumer sees a skew cost in the receipt on purchases. This is sandbox theory.

The New Fed allows market pricing in run time of the major government agencies, anonymously,  even, but accurate to last look.  On net, after the reform, I have not thought about how government evolves, bigger smaller or whatever; G will be more liquid and more responsive.   For better or worse.  It is one of those things, we are not changing anything, just doubling the transaction rates, absolutely neutral all the way around.

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