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

Xuanyi
September 27, 2016
5k

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/

Xuanyi

September 27, 2016
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Transcript

  1. How To Make Money
    SyPy September 2016
    Photo by Ondrej Supitar
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    View Slide

  2. WHAT WOULD THE WORLD
    LOOK LIKE IF THERE WERE
    NO BANKS?
    The Question
    Photo by Tim Evans
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    View Slide

  3. WAR
    The Surprising Answer
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    View Slide

  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
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    *The τραπεζίται were pretty much the first bankers
    Photo by Dave Meier

    View Slide

  5. WHAT IS MONEY?
    The Underlying Question
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    View Slide

  6. LET'S SIMULATE
    To Understand Money
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    The Sims Plumbob is a copyright and trademark of EA Games

    View Slide

  7. Very Elementary
    Simulation
    •  No dynamic changing of interest rates
    •  No dynamic/reactionary behaviour
    •  Single-lifetime simulation.
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    View Slide

  8. Very Elementary
    Simulation
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    Real Growth

    View Slide

  9. Very Elementary
    Simulation
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    Boom/Bust
    Cycle

    View Slide

  10. Very Elementary
    Simulation
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    Stagflation
    (0 growth, prices
    keep inflating*)
    * Price ceiling was created for computational purposes
    Different run of the simulation from the previous

    View Slide

  11. Very Elementary
    Simulation
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    Slow growth
    owing to
    investments
    Detbt not allowed in this run

    View Slide

  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
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    View Slide

  13. Unrest Every Century
    •  1920s – The Great Depression è Hitler*
    •  1840s – The End of Class; Civil War brewing
    •  1780s – Louis XVI beheaded
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    * Godwin's Law invoked

    View Slide

  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
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    * Godwin's Law invoked

    View Slide

  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?"
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    View Slide

  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.
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    View Slide

  17. DOES IT MAKE SENSE TO
    MOVE ONE'S ENTIRE
    NETWORTH TO BITCOIN?
    Corollary Question
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    Photo by Craig Dennis

    View Slide

  18. DOES IT MAKE SENSE TO
    MOVE ONE'S ENTIRE
    NETWORTH TO GOLD?
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    View Slide

  19. TIME FOR A
    FOUNDATION?
    Worth Considering
    Follow @chewxy Hari Seldon on Twitter

    View Slide