The Flow of Funds

I’ve made an diagram of how money flows around in the modern monetary system, and added some MMT propaganda around it for effect. I plan to make reference to it an upcoming post, but for now it’s just a pretty picture for you to look at.

5 comments to The Flow of Funds

  • Larry Staton Jr.

    I get a 403 error when I try to access your pretty picture so I can’t see it. i just see a small question mark.

  • askod

    Very good tool.

    A nitpick: The Government to Commercial banks and Commercial banks to Government arrows are somewhat hard to connect to the right labels. Is the red Loans (text above Central bank) or Excess reserves? Does Interest payments refer to the blue Government to Commercial banks or to the yellow Central bank to Government arrow?

    To be clear: I did figure it out, but first I cold not find the label for Government to Commercial banks. So moving the labels for greater clarity would be good. Perhaps outside the arrows instead of inside?

  • David Chester

    The diagram does not represent all of the working parts of a macroeconomy in a country. it omits the production side and this using Adam Smith’s description of the production process should include landlords, workers and capitalists.

    Without including all of the social system there is no certaincy that the use of this model will give the true results or effects, after the introduction of new policy changes. The full model which should be used here is available in Google Images:
    DiagFuncMacroSyst.pdf

    where all of the Smithian effects are included with some more necessary terms too. It should be noted that it is not necessary to make the model more complicated than this but it is also important not to over-simplify it. This model that I use has the absolute minimal number of entities and money flows to fully describe or cover our social systems. Consequently I find that any result comming from the simpler model illustrated in the blog, is likely to be incorrect.

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