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PHASE

Draft. Block diagram only. This is the plant. Dashed boxes are inputs. Nothing inside a solid box is a knob.

Debt plant Primary deficit and interest sum into the deficit, which integrates to the debt stock. The stock divided by income is the debt ratio. The share due times the stock is maturing principal. Deficit plus maturing principal is gross supply. The market sets a yield from that supply, the private bid, and Fed buying. The book coupon lags that yield. Interest is the coupon times the stock, and it returns to the deficit. + + primary deficit debt stock ∫ ÷ income income Y maturing w·D share due w market private bid Fed buying book coupon lag interest c·D d deficit D supply r c interest same w

Two tanks. The debt stock integrates the deficit. Refinancing does not fill it: principal that matures and is issued again is not new debt. The book coupon lags the market yield, and it only moves as debt comes due. The share that comes due is w. That same w is the maturing principal and the speed of the lag. It is one wire, drawn twice.

The market is not a tank. It sets the yield r at which this year’s gross supply is taken. Gross supply is the deficit plus the maturing principal. The private bid and Fed buying are the two other inputs to that block. What they do not take, the yield has to clear.

Interest is the book coupon times the stock. The magenta wire brings it back to the deficit. That is the loop.

Five things enter from outside, drawn dashed. The primary deficit. Income. The share due. The private bid. Fed buying. The plant does not move them. The debt ratio d is the stock divided by income. It is a reading, not a third tank.