Currency banker loss function

In a price neutral environment, the currency banker loses currency in response to positive innovations in the real use of bearer cash. Bearer cash is free cash, owned and restricted only by the holder, obtained by snookering the currency banker.

The mechanism is a silent real productivity boost that increases exchanges consistently.  The currency banker is guaranteeing to keep deposit and loan skew matched. But it is consistently behind from a method of growth, it is making too many of its own loans to to fewer of its own deposits, its market making risk keeps jumping just beyond bounds, forcing a requant on occasion rather than adiabatic change.

The real economic innovation has control of the fourth moment on those structured deposit and loan queues. S/L eventually goes back to normal. Normal, in this case, implies some risk adjustment process, of assumed character. That is, the market risk remains where it was, queue rank is restored.

The whole human principle in sandbox is that we humans have our own natural tolerance for waiting in line. The first effect of two mistmatched is that both customer and clerk feel like they make unnecessary trips to the counter. They get deja vu and restore real queues to their natural. Hence the standard two color banker is the simplest wiener process, liquidity adjusting blob. Its long term destination buried in the market risk account.
The mechanics of it:

The simple two color pit boss promises to keep loan and deposits balanced to a rank six structured queue, the market making risk will be about 1.5 points of the total outstanding. It takes ll its cash in advance loans and encodes them to the bounded uncertainty. It insert banker self loans as needed to make the balanced tree. It does the same with deposits in advance, adding self deposits as necessary. Then the pit boss scales the one to the other with an interest ratio such the the aggregate difference in it self loans and self deposits is minimum.

The 'in advance' is the implied risk equalization. One can see this is the blob liquidity function, it assumes we are all lazy blobs and will consistently keep a constant tolerance for waiting in line. It is not a necessary, it is the minimal form of that loss function. We are operating at the base of the Markov tree, the smallest containers packing channel, the market risk channel is least energy.

The three color matches deposits and loans, but the risk still contains the fourth moment, and that it matched to the siegniorage in advance. Tat seigniorage is liquidity income to some of the accounts, specifically large government programs see that right away. Thus, the effect is captured, risk equlization was broken via the 'right to coin', and recovered via the seigniorage bet along a known axis. It becomes an acknowledged payment to government accounts, a known , slightly variale, tax collected at the Fed.

Central banking can work, we need to get a very long contract on the seigniorage risk. Then we can move up the Markov tree do some real quarking. But we will need some really smart senators. The senators need to purchase their desired monopsony gains fifteen years in advance. Renewability implies whatever gain they see can be repeated by half. The three color jump actually requires cash management within the government sector, it is the owner of the Fed, still. The key to controlling senators is to send the gains back to state capitals. Stabilizing the tax removes an interest charge wedge, that savings mostly goes to state capitals.