How To Make Money (How Money is created in the economy)

I gave a talk at Sydney Python for September 2016, specifically regarding how money is created in our modern economy, and why so many people misunderstand debt.

The talk was partially live-coded through with a iPython Notebook, simulating a economy. That iPython notebook will be shared soon.

Some of the results have been reincorporated into the slides with some new notations. Some slides have been edited from when the presentation was given (for more clarity). A last slide has been added to round off the presentation, which I felt didn't finish too correctly.

Code: https://github.com/chewxy/economy-sim
View: http://nbviewer.jupyter.org/github/chewxy/economy-sim/blob/master/How%20To%20Make%20Money.ipynb
Play: http://mybinder.org/repo/chewxy/economy-sim
Writeup: http://blog.chewxy.com/2016/09/30/how-to-make-money/

Transcript

1. How To Make Money SyPy September 2016 Photo by Ondrej Supitar Follow @chewxy on Twitter
2. WHAT WOULD THE WORLD LOOK LIKE IF THERE WERE NO BANKS? The Question Photo by Tim Evans Follow @chewxy on Twitter
3. WAR The Surprising Answer Follow @chewxy on Twitter
4. LET'S TALK ABOUT BANKS Common Conception •  Banks store value •  Banks were invented for safekeeping of money •  Banks are thieves Reality •  Banks create value •  The first bank was created to create credit* •  Banks aid in allocation of capital Follow @chewxy on Twitter *The τραπεζίται were pretty much the first bankers Photo by Dave Meier
5. WHAT IS MONEY? The Underlying Question Follow @chewxy on Twitter
6. LET'S SIMULATE To Understand Money Follow @chewxy on Twitter The Sims Plumbob is a copyright and trademark of EA Games
7. Very Elementary Simulation •  No dynamic changing of interest rates •  No dynamic/reactionary behaviour •  Single-lifetime simulation. Follow @chewxy on Twitter
8. Very Elementary Simulation Follow @chewxy on Twitter Real Growth
9. Very Elementary Simulation Follow @chewxy on Twitter Boom/Bust Cycle
10. Very Elementary Simulation Follow @chewxy on Twitter Stagflation (0 growth, prices keep inflating*) * Price ceiling was created for computational purposes Different run of the simulation from the previous
11. Very Elementary Simulation Follow @chewxy on Twitter Slow growth owing to investments Detbt not allowed in this run
12. Very Elementary Simulation •  No dynamic changing of interest rates •  No dynamic/reactionary behaviour •  Single-lifetime simulation. •  Enough to show basic concepts and really macro behaviours like cycles •  Main Takeaway: Growth is powered by debt •  Growth also powered by investments, but no debt means fewer investment opportunities Follow @chewxy on Twitter
13. Unrest Every Century •  1920s – The Great Depression è Hitler* •  1840s – The End of Class; Civil War brewing •  1780s – Louis XVI beheaded Follow @chewxy on Twitter * Godwin's Law invoked
14. Unrest Every Century •  1920s – The Great Depression è Hitler* •  1840s – The End of Class; Civil War brewing •  1780s – Louis XVI beheaded •  See also: works of Peter Turchin; maybe also Santa Fe Institute people Follow @chewxy on Twitter * Godwin's Law invoked
15. Debt is Not Bad •  Poorly managed debt is •  No debt means no growth* •  No growth is historically responded with civil unrest† *other than intrinsic growth like population growth rate † this simplistically settles the question of "is growth a moral thing to strive towards?" Follow @chewxy on Twitter
16. On Institutions •  Institutions are one of the most fundamental human technology •  Agglomeration happens on all levels of existence •  Finance companies? Technically they make things more fluid, but can screw things up too. Follow @chewxy on Twitter
17. DOES IT MAKE SENSE TO MOVE ONE'S ENTIRE NETWORTH TO BITCOIN? Corollary Question Follow @chewxy on Twitter Photo by Craig Dennis
18. DOES IT MAKE SENSE TO MOVE ONE'S ENTIRE NETWORTH TO GOLD? Follow @chewxy on Twitter
19. TIME FOR A FOUNDATION? Worth Considering Follow @chewxy Hari Seldon on Twitter