The Fed as tax collector

The usual crowd is trying to understand the Fed in terms of standard currency emitter, but it is the wrong model. The Fed also collects an adjustable seigniorag stream, it is a tax collector.

Then we see a simple business operation in the repo market, loan demand became volatile and treasury raised its monopsony fees. Then is becomes clear, this is an unstable central bank, it loses market share when it intervenes in the repo market. The Fed does not want to lose market share and the pricing on government goods quits working.

The only fix is to make the seigniorage fee a future bet, create a measurement axis and use it to shove seigniorage risk back onto the market and out of Treasury. Either that or move to competitive curency banking.

It seems obvious, but not if you spent ten years in 'This time is different' school. In sandbox terms, they want to force a three color model to fit into a two color trading pit. They teach the Fed as a monopoly when it is a monopsony.  Their model cannot notice the competitive banking environment because they promised something 40 years ago. If this time is truly different, then we can neutralize the recession cycles, was the idea. Traditional economics school got hoisted on their own petard.