The Principles of Financial Interferometry




The Problem at hand

Copyright US. Department of the Treasury. Fiscal Service, Federal Debt: Total Public Debt [GFDEBTN], retrieved from FRED, Federal Reserve Bank of St. Louis;, November 23, 2016.


The western financial system has been having its problems of late if you take the exponential R squared value of any sovereign debt issue you care to mention you will get a value of 0.98 or greater.

In other words the law of mathematics have taken over and not even Joe Biden can legislate them, though he will try.

The US debt more than doubled under Obama and Trump with only cents in the dollar borrowed creating a new dollar of GDP this will not end well for all concerned. This is what happens when you engage in futile wars of conquest and give yourself a tax cut and artificially low interest rates all at the same time.

 Basic Concepts


The truth is the market goes up because people are buying it and people are buying it because it is going up and the same goes on the down side.

That’s the long and short of it, it is a simple exponential function with the output feeding back into the input.

Despite the Feds best efforts no none had an infinite amount of money and therefore the system will have its limits, which at present have to be measured using scientific notation.

Markets are by definition are an elastic medium and will therefore if taken literally are also behave like damped coupled oscillators and nothing more. When Money goes in the integral becomes divergent. When then money is taken out the integral becomes convergent.

Money is inherently exponential, which is the basis of and is proved by the compound interest rate function and reality. Any attempt at process control (monetary policy) that does not take this into account is doomed from day one. Many examples of this can be found around the world to day.


The Euro springs to mind as yet another classic attempt to cobble together another half baked fiat currency without a political union or centrally regulated bond market. That allows interest rate price discovery to act as a damper on spending, with debt levels that have to be measured using scientific notation.

Given that Laplace is nothing more than the indefinite integration of the same function, using s instead of r as the variable. It stands to reason that any thing compound interest can do Laplace can do better.


The simple facts are that when observed in any detail financial markets turn out to be nothing more than telecommunication networks that transmit price and volume information at close to the speed of light.

Therefore they will obey the mathematics of the propagation of information from a central location. ie: Schrodinger’s Equation and Young’s slit experiment.

They will display interference patterns, which cannot be seen let alone solved using the prices recorded in the Cartesian plane, especially when calibrated in terms of the Roman calendar and the base ten number system.

The data has three co ordinates. 

  1. The time of the Observation.
  2. The price at the time.
  3. The Volume of securities traded. 

Any solution is going to take the form of a function that accepts three inputs.

Therefore if we are looking at this in two dimensions through unsuitable diffraction grids and scalars we cannot expect coherent results.

What we need to know is the impulse response of the system so we can deduce the transfer function that will stabilize the system output.


Keeping in Mind that Newton ran the Royal mint for a while I thought I would see  how it would sound if he said it with a few substitutions and test the mathematics it would describe.

The Three Principles of Motion of Financial Markets

1. A price at rest will remain at rest unless acted upon by a external monetary force

2. A price in motion will remain in motion unless acted upon by an external monetary force.

3. For every transaction there is an equal and opposite transaction.


A price at rest will remain at rest unless acted upon by a monetary force.

Unless somebody buys or sells a security its price does not change the bid and ask may change but the price of the last trad is an instantaneous value with no dimension in time.

Therefore a price will only change when someone applies a force to it either by buying it or selling it in real time.

A price in motion will remain in motion unless acted upon by a monetary force.

When a market has begun to move new money enters the market, and causes the market to jump to a new shell in exactly the same way an electron changes its orbital.

The eventually people start to take money out and the wave as it collapses in on itself back to a lower shell.

This creates a spring force that brings about  the change in the major trend direction.

In a leveraged market this process is highly exponential especially on the down side as the margin calls go out and a cascade collapse take place, this is the real reason markets collapse not because of panic selling but from a lack of new buyers because the system has reached the limit of new money available in the hands of the suckers investors.

For every transaction there is an equal and opposite transaction.

If you buy something in a zero sum game then sooner or later you must sell it back to the market. So there are always two sides to a trade, with one for each leg of the transaction and each side of the transaction, there is always a matched pair of a long and a short

These two components both simultaneously move with respect to time from the beginning to the end of a transaction they are of equal and opposite magnitude and force and cancel out leading to a convergent integral.

When all the transactions in a market are integrated together they must always also converge to zero and if they don’t, then your version of the financial universe is broken and will soon be going through the DT’s like America system is at the moment.