71–80 of 323 posts
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
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?
Inflation, on the other hand, forces to make cheaper apples people can still afford.
Your game is only half done.
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?
This game needs a "gold standard" mode to see what happens to the toy economy with no central bank! EDIT: It would also be nice if the game paused around major events to give you more time to think & adjust. I found that the economy went off the rails if you don't react right away.
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.
Relative value usually matters more than absolute value: if money is depreciating at 1% but you can invest in stocks for a 1% return then you would invest in stocks (ignoring risk). Google: alpha vs beta returns.
Risk/volatility and diversification also matter: putting all your wealth into a single asset class is probably a bad idea.
> bare minimum of apples needed for survival
Edit: People are not ideally rational spenders. Also depending on your age, you may value spending now more than saving for an uncertain future. At 70 your death probability hits 2% per annum[1], so saving 1% for next year might not make sense. At any age you may look at history and you might not trust that your money will useful next year (plenty of examples where stable governments have screwed the pooch).
Earlier quoted context omitted.
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.
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.
For decades computers and related technology have been dropping in price. Yet people still buy and the industry is one of the most prosperous in the economy.