Pit boss rules still apply. Applied very haphazardly. The losses and gains appear as positive and negative taxes. 15% interest rate is an impossibility excepot when government is running a negative tax. When rates are that high, it is a good indication government is suffering the side effects of a central bank regime change. The bond market wants to claw back some prior and quite sudden losses.
Like a needle that never quite centers, government will eventually, unknowingly begin using the bond market for tax collection, a positive tax. It is the unknowingly that is the problem, the behavior seems quite normal, though fouled a bit, for any pit boss, the pit boss are forced toward the neutral position, money at risk bounded. The partial solution is, like I say, just give the Treasury a contract for the inflation tax and that is the best we can do; but it is a lot of reduced volatility.
If we do this then the economists will look back to revenue sharing from the seventies to lessen the incidence of the inflation tax. In the USA we have different peculiarities then the ECB, the the principle remain. In the ECB Germany eventually will be forced into a role of pit boss.
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