Transition of platforms in british education 3211

And the reserve requirement.

The dutch found out about this in the tulip boom, and subsequent bust, severeal hundred years ago.

If you can lend indefinatly you will get a super-unstable system, but the limiting factor does not have to be great.

The critical pivot-point has been empirically determined to lie between 3.5 and 4% of mandatory withheld liquidity.

So instead of M = m0^n (where m=initial money value and n=number of times money has circulated) we get a sum where

mn = mn * (1 - w) term n is the previous term less a factor

i.e.

m1 = m0 * (1 - w)

M = m0 + m1 + m2 .... mn

This figure, w, is the reserve requirement, where the bank must buy mandatory bonds or bills in the reserve bank; and the reserve bank use the proceeds to do active stabilisation.

The enumeration of this arithmetic sequence is extremely sensitive to the values of w. Even a few clicks (a click is slang for 1 10000) can make a difference.

Normally the feds only manipulate the interest on w, this is known as the "base rate". In extreme cases they manipulate w itself; so when you hear "change in federal reserve requirement" you will know they are taking extreme measures.

It is also very lucrative to be that federal reserve.

Doing active stabilisation they act as market maker.

They therefore have three windfall sources of money :

* The first time issuance of the money, issued without interest obligations * the reserve requirement, issued with nominal=small interest obligations * The market maker windfall (insbreastutionally buy low, sell high)

The United States also have the benefit of issuing money for the whole world, and therefore gets to do this for everyone else.

Nice work if you can get it.

-- mrr