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Show HN: A central bank simulator game with a realistic economic model
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Re: Show HN: A central bank simulator game with a realistic economic model
#172This 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.
My limited understanding, is (feel free to correct me): The problem with gold is that it's finite. It might be stable, but it's stable for a very small amount of money. The existing system allows us to create a huge supply of money that is used to drive the creation of these monster companies that end up doing things like inventing new microchip fabrication processes and iPhones. If you suck up all the money supply t…
Basically, you want to be able to control the quantity of money, because it's a key element of monetary policy. Monetary policy is a tool that governments use to counter boom and bust cycles, so economic cycles are smoother, and to maintain price stability. Under a metallic standard, monetary policy is much more limited. As far as I know, a central bank can still sterilise inflows of money that result from a trade surplus with the rest of the world, and release its reserves, as a way to influence the quantity of money, but it's a lot harder.
Re: Show HN: A central bank simulator game with a realistic economic model
#173After a rather dismal first couple of runs I read the blog post for some hints. The best I found was to try to raise rates during the good times so there is wiggle room during downturns. I was able to get 443,904 by raising to over 10% during the initial prosperity period and was able to cut rates in half as soon as there was a crash. Ultimately I stabilized at around 3.5%. As of the time of this post I think that is…
At first, it looked to me like you could barely influence the economy. But a couple of runs later, I found wildly different results (e.g. having hyperinflation and huge economic crisis) depending on what I'd do. Since the income from the central bank's interest is paid out to the people (and vice versa, negative interest will be passed as debt), the challenge seems like finding the correct ratio to increase GDP: infl…
The model they use in the simulation is a bit weird.
In reality, keeping a steady nominal GDP is a good idea. In fact, adopting a nominal GDP level target will make the market help you keep things steady. (By anticipating your central bank actions.)
Re: Show HN: A central bank simulator game with a realistic economic model
#174After a rather dismal first couple of runs I read the blog post for some hints. The best I found was to try to raise rates during the good times so there is wiggle room during downturns. I was able to get 443,904 by raising to over 10% during the initial prosperity period and was able to cut rates in half as soon as there was a crash. Ultimately I stabilized at around 3.5%. As of the time of this post I think that is…
> The best I found was to try to raise rates during the good times so there is wiggle room during downturns.
Yeah, that's pretty silly in reality. There's no zero lower bound in reality.
Negative interest rates work just fine. Or even simpler: buy assets that are not just short term debt. (In the extreme case: any positive price for a 'perpetual bond' corresponds to a positive interest rate. Or take inspiration from Singapore's Monetary Authority: they buy foreign exchange instead of bonds, and thus don't have to worry about interest rates at all.)
Re: Show HN: A central bank simulator game with a realistic economic model
#175I 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?
We don't know what the economic model is actually doing but remember the central bank controls the number of bankreserves, the reserve ratio and the interest rate. A -0.5% interest rate is the same as 0.5% inflation but with the caveat that it doesn't increase the money supply. If you never issue more central bank reserves the money supply won't go up but the circulation of money is encouraged by the negative interest rate. As long as your orchards keep operating and producing enough apples, the price of apples will remain stable with the money supply.
Central banks do QE to increase total bank reserves which is an ugly bandaid for not having to cut interest rates below zero. Inflation then allows real interest rates to be negative. Inflation isn't the same for everyone though, resulting in unfair wealth transfers.
Re: Show HN: A central bank simulator game with a realistic economic model
#176I 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
Allow me to suggest a taste of history https://www.heritage-history.com/index.php?c=read&author=car... or if you want to cut corners just scroll to the bottom of the page. To study central banks you need those history before the model :-)
You might be better off studying Scottish and Canadian monetary history, instead of the Bank of England.
https://www.amazon.com/Good-Money-Birmingham-Beginnings-Coin... is also really interesting.
Re: Show HN: A central bank simulator game with a realistic economic model
#177Earlier quoted context omitted.
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. inc…
Isn't a negative interest rate basically UBI?
Depends on the inflation rate.
If prices are falling fast enough, a negative nominal interest rate is still a positive real interest rate.
Re: Show HN: A central bank simulator game with a realistic economic model
#178This 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.
My limited understanding, is (feel free to correct me): The problem with gold is that it's finite. It might be stable, but it's stable for a very small amount of money. The existing system allows us to create a huge supply of money that is used to drive the creation of these monster companies that end up doing things like inventing new microchip fabrication processes and iPhones. If you suck up all the money supply t…
Why does the supply of money matter when it isn’t consumed? I understand why the supply of, say, steel is important: because we consume x tonnes of steel to create a building, so a limited supply of steel limits our ability to build new buildings.
However, when we use money we don’t consume it. It simply changes owner. Sort of moving through the economy unchanged in form.
> If you suck up all the money supply the economy might be stable in terms of inflation but it can't grow.
How do you explain the solid economic growth in the 40-year period 1870-1910, which happened during the international gold standard?
Re: Show HN: A central bank simulator game with a realistic economic model
#179This 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.
Gold standard and central bank are two relatively independent topics.
You can have both, neither or either one.
Re: Show HN: A central bank simulator game with a realistic economic model
#180This 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.
Eh, that did not happen in real life when countries were on a gold standard..