MoneySupply

💼Looking for work💼 I'm currently open to new opportunities in hands-on architecture, management, and/or innovation work with LLMs. Please contact me on my LinkedIn if interested.

The following are speculative thoughts that are personal and do not reflect any political ideology; instead, they aim to view the economic issues here in a more mechanical way. The following is not financial advice, or advice of any sort.

The amount of money floating around in an economy is its money supply. Similar to bloodflow in your veins, money flows through the economy. You can get high blood pressure, a headache, a stroke, or a heart attack if there's something wrong with your heart. Similarly, the large pumping mechanisms for money are the government, the financial institutions, and large enterprise corporations -- if they malfunction, then problems occur.

So money supply can be modelled in a way similar to fluid dynamics. There's a whole field called Econophysics that can be drawn on to inform economic decisions (both by the governors, and by the individual).

Money supply can also be modelled thermodynamically. See Thermoeconomics

For example, I was able to predict the rising interest rates of 2023 by reasoning about money in a thermoeconomic way. I visualized money as a liquid, and reasoned about the "flood" of money that became available due to COVID. From this vantage point, it was clear that reducing the money supply would take priority at some point. One way to solve the oversupply would have been with quantitative tightening, which is part of the strategy that many world governments & reserve banks relied on.

From a Canadian perspective, my running theory about house prices is also thermoeconomic -- houses act as thermodynamic sinks which trap money. In the upcoming years, the government is faced with a tough choice. Houses could be devalued by allowing a correction, but this could have severe financial consequences for households. Or, we could inflate away the currency so that the "real money" floating around in the economy declines significantly, and a million dollars aren't worth as much as they used to. Due to the economic impacts of recent trade wars & events (current date: 2025-06-24) it is unlikely that we will raise interest rates, because that would significantly weaken productive manufacturing capacity during a time of economic instability. Not a good idea. I think the likely next step could involve a stay or steep drop in the interest rate, leading to inflation again -- although this is definitely speculative.

Yet another way to offset this balance could be to boost local manufacturing in a big way. A local economy that consumes a larger portion of what it produces than before, would lead to real local wage growth. The increase in goods & services locally produced would mean higher wages and demand for labour. This would be inflationary, but the increased demand for labour would offset the impact of inflation on real spending power.

Whether inequality will rise seems uncertain, but this seems possible to me over the next 10 years, once current headwinds are overcome in the next 2-3 years (current date: 2025-06-24). We shall see.