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Show HN: A central bank simulator game with a realistic economic model

benoitessiambre.com

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Re: Show HN: A central bank simulator game with a realistic economic model

#61

Post by OJFord »

yreg wrote: post #40

I tried to keep inflation between 1.5-2% for the first 50 months and then decided to find out what happens if I YOLO permanently fix the interest rate to -0.5%. After the 240 months I somehow ended with GDP 442999 and 1.53% inflation. How come? Shouldn't I have a runaway inflation?

Similarly I immediately lowered to -0.25% and left it there, really quite stable and climbed gradually (not monotically, but close) to 442370.

I assume it needs a bit of a tweak for negative inflations, or is limited by the events being fixed - 'people spend 12% less' is more likely to happen at higher interest rates for example. And in particular if we weren't leaving it fixed but had only just lowered it, (i.e. increased motivation to spend) that wouldn't really make sense.

Re: Show HN: A central bank simulator game with a realistic economic model

#63

Post by Androider »

In my first game, I carefully managed the interest rate to keep inflation around 2%: Your economy produced 431540 apples.

Next game, I set the interest rate to -0.50% right away and left it there: Your economy produced 442411 apples. Inflation was 1.5% in the end.

Doesn't seem to matter too much what you do. Maybe in real life too.

Re: Show HN: A central bank simulator game with a realistic economic model

#64

Post by doubleunplussed »

> When the central bank lends money at positive interest rates, the interest profits or “seigniorage” are distributed to everyone like dividends (they would in the real world go to the government which would spend or distribute them). If seigniorage was not distributed, at the end of each loan, the money supply would shrink a little bit as the central bank would be gradually absorbing money from the economy as interest. Seigniorage serves to neutralize this.

Could you elaborate on this? Is this really what happens in the real world - interest on central bank loans going to the government? I was very much under the impression that this interest goes to the central bank (and is thus destroyed), and the fact that this would appear to contract the money supply seemed like it just increased the need for the central bank to increase the money supply in other ways. To be honest, I am still not clear on how the money supply is increased permanently by a central bank - all textbook examples of money supply changes appear to only do so temporarily.

Re: Show HN: A central bank simulator game with a realistic economic model

#65

Post by dwighttk »

Androider wrote: post #63

In my first game, I carefully managed the interest rate to keep inflation around 2%: Your economy produced 431540 apples. Next game, I set the interest rate to -0.50% right away and left it there: Your economy produced 442411 apples. Inflation was 1.5% in the end. Doesn't seem to matter too much what you do. Maybe in real life too.

I lowered interest rates to 0 slowly and then to -.5 when I realized it could go down.

Ended up in the same neighborhood 400somethingK

Honestly expected inflation to go up at some point

Re: Show HN: A central bank simulator game with a realistic economic model

#66

Post by selectodude »

BirAdam wrote: post #46
jcfrei wrote: post #28

Earlier quoted context omitted.

That would result in an economy with huge deflation: People consuming the bare minimum of apples needed for survival because their gold savings would appreciate each year in value.

If that were true then the Victorian era should not have happened.

100 percent real GDP growth over 100 years would be an absolute disaster in todays world.

Re: Show HN: A central bank simulator game with a realistic economic model

#67

Post by selectodude »

BirAdam wrote: post #47
pbourke wrote: post #41

Earlier quoted context omitted.

> While there were panics and issues before the era of active central banks, most fo the time, things were calm. Wow - this is insanely inaccurate. Before the active central bank era (call it post-WW2), recessions lasted up to twice as long as they do during the modern era. Unemployment also peaked at much higher numbers: 25% during the Great Depression, for example. The pre-central bank localized agrarian and early…

The Great Depression happened after the US central bank was created in 1913.

The Fed didn’t have any ability to effect money supply until 1932 when the US went off the gold standard.

Re: Show HN: A central bank simulator game with a realistic economic model

#68

Post by zeusk »

nwah1 wrote: post #52
yreg wrote: post #40

I tried to keep inflation between 1.5-2% for the first 50 months and then decided to find out what happens if I YOLO permanently fix the interest rate to -0.5%. After the 240 months I somehow ended with GDP 442999 and 1.53% inflation. How come? Shouldn't I have a runaway inflation?

Under certain Keynesian views, Fed policy is mostly irrelevant, and only fiscal policy matters. Or actual printing... which low rates and QE are very different from. Another view from the neoclassical school has a similar conclusion dubbed the Policy Ineffectiveness Proposition. But others say Fed policy does matter because in the real world contracts and prices are sticky. https://en.wikipedia.org/wiki/Policy-ineffe…

How is QE or low rates not money printing?

Low rates causes higher private lending, borrowing creates money (fractional reserve banking). QE also creates money by Federal Reserve buying Treasury's bonds with printed dollars.

Both of these are temporary, but we have had QE and low rates for over a decade now. QE was supposed to be unwound in 2018, but covid pushed it to new peaks.

Re: Show HN: A central bank simulator game with a realistic economic model

#70

Post by xwolfi »

BenoitEssiambre wrote: post #2

I made this game in order to try to wrap my head around central banks, inflation and macroeconomics, in order to get a better understanding of the aftermath of the global financial crisis and the current period of high inflation. Here is a blog post that goes into further details: https://benoitessiambre.com/simcb.html

Can we scam little people with crypto using central bank scapegoating as well ?
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