The central bank still suffers civil war shock, folks; it is i the 14th amendment and FDR era court decisions. The central bank will maintain the arbitrage implied in state mismatch as long as it can, until the rebels are at the gate.
It suffers entitlement shock, specifically social security, and keeps a generation arbitrage open for that. and central bank is part of the eight year recession cycle. All of these post stress events embedded in the operation of government by law, regulation, fear and amendment.
Great, easy to compensate once we know the root plan, we can minimize, not eliminate. We force the banking system to keep a closer eye on this stuff with trading pits. Match spectrum, move it to consciousness.
Let us just trade the central bank arbitrage on 15 year semi-repeatable trades? Trade the state problem on a per budget basis with a csh earmark swap? Let the senators minimize the presidential recession cycle with specialized management? Fire the primary dealers?
Imagine if we knew this stuff before the civil war? Before the Green Mountain Boys forged a rump state? Before the Massachusetts Bay revolt created Rhode Island?
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