My kid had some doubts about her finance lessons at school. The way the economy is explained above the financial system is quite fascinating.

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My explanation is a bit simpler because it's how we teach it in engineering schools, not business schools. The difference is about licensing. Business schools add some practical knowledge, like the skills of the profession that act as a sort of entry barrier with exams like the SIE. It's kind of like understanding how a video game operates.

Regular engineers just need to grasp the system as a regular investor or to properly evaluate their business plans.

Imagine the economy as a soccer game. The central bank is the goalie and they usually pass the ball to the players close by. The other team makes sure the ball hardly ever gets to the strikers.

The real economy works the same way. Replace the ball with money. It's handed out as credit money and eventually makes its way back to the goalie, or the goal. Some players might hold onto the ball. And there are multiple balls in play. The goalie hands out more balls in the real economy.

If the ball never gets to the strikers, that's like quantitative tightening. The goalie needs to hand out more balls and some will eventually get there.

If there are too many balls in play, some players will gather them. They're the rich folks. They might not want to play anymore. Sometimes they might start playing with two balls, which is like higher prices and inflation.

The economy is divided into classes, or ethnic groups. The ball might get further on one side than the other. That's like apartheid. When one side hoards, while the other side has nothing, players will go to that side and try to take the balls. That's like communism. You might need more referees.

The goalie can fix the situation by favoring the side that's lacking.

The writer believes in giving not just voting rights but also money-making abilities to the people. This means that every citizen should be able to borrow the same amount of money from the central bank each year.

Eventually, the system might change, as natural disasters make some areas riskier requiring more exchange with society, more balls. This is where a strong federal state, The Empire, steps in by spreading credit information better. Federations exist because they can lower interest rates by balancing the system.

But there's a catch. If federations use the same currency, they need to take some taxes from successful ventures and give to the ones that are struggling. Sometimes they need to get rid of unsuccessful ones to promote success. This political maneuvering is what makes elections interesting. The data shows this sparks investment and growth making the empire cash flow positive. This empire isn't the whole country, it's just an institution that balances risks.

You can see this in Trans-Atlantic relations. When the GBP, EUR, and USD prices diverge, some ventures are inefficient or they fail in their respective geographies. This allows markets to naturally smooth the system by drops in exchange rates playing on lower wages strengthening the local competitive industries.

If the ruling classes try to intervene pulling back successful businesses by overseas taxation or other means then strong currencies fall back due to excess payments or failing companies due to sabotage and regulations. Lower single digit gross domestic product growth is an example of such situations.

The British have been playing with these kinds of simulations for a long time. I'm not sure where it started, but maybe the long, dark, rainy winter nights helped them appreciate the sunshine and come up with analytical games like bridge, tennis, football, or polo.