Unpleasant monetarist arithmetic

 Yes, I do read this stuff David Andolfatto, and I watch your presentation and I went back and read the Sargent and Wallace paper so named, and read some of the critics responses.

We are talking about the Fed and Congress offsetting their plans.

My response is first, let us understand government goals. Consider government as a value chain independent of the private sector. Further, let us consider government to be a balanced value chain. The Laffer optimum is meth when the government pays an interest cost equal to the disequibrium costs it expenses onto the economy during investments. This is the r = g condition.

In other words, all things being equal, government wants to induce a structural change and is willing to pay the short term disequibrium when doing so. We know that number from looking backwards a long way, and government invests in ten year depreciation cycles and pay about 2-2.2%.  Truman had it at 2.0%. This is the NGDP target.

no government is a balanced distribution, otherwise there would be pure distributed socialism, the ergodic condition.  Government will cycle, guaranteed, the it will cycle naturally to balance distribution over multiple depreciation cycles.  We know that cost, it is today, about 1.4% per year.   We know who to ask, my pals, the ten states who occupy the most liquid spot in the government channel.

This is your monetary base, this defines a finite set of equilibria, and defines the known but unpredictable costs, This will not change. This is the unpleasant monetarists arithmetic.

Government will pay its fair costs, the entire issue is for government to be a little more accurate about its estimates, nothing more. That means the solution is to give Treasury a multi year contract to double spend about 1.5% a year, and for the House and Senate to spend so9me of that in a revenue sharing system.

Your presentation is correct. I think the stated solution  What Powell really wants government to do is hold the fort and take this moment to roll over that huge pile of debt. That is stimulus, that raises returns to your overlapping generations. Powell will not get it, the current interest paid yearly on all debt is about 2.0%. 

What is not accounted for is the correction cost for Constitutional imposed government imbalance, the inflation of 1.5%. The Fed is in no position to collect that, and Treasury does not want to impose it.

Converting ave's model to finite information model:

Dave ends up with an optimizing curve and shows conditions needed to keep government and the Fed  moving to the top of a convex.  The finite model us gives you the finite set of point the system will jump around, but never reach the optimum.

Use Bayes, I suppose. The govennment will under go a state change, a flip flop, once every eight years for 10 cycles. The average sampling rate ids 40 samples per cycle.  Assume the generations know this, they read the charts.  Then ask, how accurate is earmark sharing vs revenue sharing. What is the productivity improvement by freeing the fiat banks from tax collection duty. What is the total unknowable unknowable cost for each generation.

The balanced government constraint? Over each generation, every state and every district get revenue cash such that the yield per district mostly is equalized.

The key is formulating the sharing market as encoding the state size and generating likely state quantities from a uniform random. Then finding the interest swap to minimize market making costs against the valance House quantity generator.  You force a loss function, noise that limits bandwidth, that is the what the pit boss handles run time, and in addition the pit boss carries the unknowable, hopefully about a quarter point.  That is, the revenue sharing system, working to pe3rfection, means cash handouts measure to the nearest quarter point.