# Simulation of how indexation of all incomes to inflation might work, # in a simple economy. ################################################################################ # I start with some agents, assigning them assets and liabilites. # The numbers I use are my best guesses. # If you have better numbers, please let me know (or run a simulation yourself). Fed: your assets are $4.5 trillion bonds and your liabilities are $4.5 trillion deposits Firms: your assets are $1 trillion Raw Materials and your liabilities are $1 trillion Net Worth Workers: your assets are Labor. ################################################################################ # Start the economic cycle: Firms produce Goods, Consumers buy them. Firms: buy Labor from Workers for $5 trillion Salaries. Workers: your liabilities are $5 trillion Net Worth. Firms: your assets are $17 trillion Goods and your liabilities are $5 trillion Salaries, $7 trillion Net Worth. # I ignore, for simplicity, depreciation of Raw Materials. # Workers want to buy all the Goods. Workers: buy $5 trillion Goods from Firms for $5 trillion Salaries. # Workers still want to buy more Goods. They can borrow from Banks. #Workers: buy $12 trillion Deposits from Banks for $13 trillion Loans. Banks: your assets are $13 trillion Loans and your liabilities are $12 trillion Deposits, $1 trillion Net Worth. Workers: your assets are $12 trillion Deposits and your liabilities are $13 trillion Bank Debt, -$1 trillion Net Worth. Workers: buy $12 trillion Goods from Firms for $12 trillion Deposits. # Goods depreciate (i.e., food is consumed, widgets wear out). Workers: your assets are -$16 trillion Goods and your liabilities are -$16 trillion Net Worth. ################################################################################ # Start the economic cycle again. Firms: buy Labor from Workers for $5 trillion Salaries. Workers: your liabilities are $5 trillion Net Worth. Firms: your assets are $17 trillion Goods and your liabilities are $5 trillion Salaries, $7 trillion Net Worth. # Workers can pay off their loans from Banks. ################################################################################ Show all balance sheets. ################################################################################