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[Servant Corps]

Once, I did an sporadic LP of Budget Hero, roleplaying as several different political ideologies to see how the simulation handles it. Or rather, I only roleplayed as one specific person, Ron Paul, and tried my hardest to balance the budget without ruining his ideology.

Anyway, I went ahead and did this same thing again, but this time, with a simplistic economic sim geared towards economic management: Greg Mankiw's Presidental Game. In charge of the Federal Reserve and Congress, your goal is to stay in office for 16 years and avoid impeachment in the United States (actually a hypothetical economy that makes major, major assumptions...such as a "balanced budget"; the sim appears to be a teaching tool, to help students grasp macroeconomic ideas).

My first simulation was putting this hypothetical economy on a "gold standard" that Ron Paul have hyped up so much about. My understanding of the "gold standard" is that it places a hard restriction on how much money the Federal Reserve can put into circulation, preventing it from expanding the money supply too much because it has to acquire the gold first. This wold lead to a constriction on the Federal Reserve, and most importantly, take the control away from the Reserve and make it fixed.

Previous attempts at putting the economy on the gold standard had some successes, and many, many failures. Usually, what I intend to do is to constrict the amount of "new" Money going into the economic system by setting the Money Supply to 1% and then gradually loosen it up 1% every year up to 5%, where it will remain for the duration of the simulation. The loosening is necessary because keeping the Money Supply at a very low rate will instantly cause a huge increase in the unemployment rate, reducing my popularity to dangerously low levels. What usually happens if that I either get thrown out of office or I survive the initial drop in popularity and the economy performs adequately before self-destructing near the end of the game, with inflation slowly increasing.

Then I realize that maybe I may have loosened the money supply a bit too much, far beyond what Ron Paul want. Even though the final Money Supply rate is still lower than the normal Money Supply of 8% at the start of the simulation, the fact that I still have to do a gradual increase of the money supply indicates that the Federal Reserve still holds too much power to control the Money Supply and that this isn't really a "gold standard". Therefore, I decided on a new course of action: reduce the Money Supply to 4%, and keep the Money Supply at that rate for as long as possible.

Let's see if this time will be different.

Spoiler: Gold Standard, Part 1 (click to show/hide)

...and I already can see this to be a short game. This game already starts off with a horrible random event that just caused a recession, due to "aggregate demand" being reduced. Output growth (which is GDP growth) is negative, and my popularity is instantly down 10%. Since implementing the Gold Standard will cause even more unemployment (and popularity), I already expect me to get thrown out next turn. Well, I might as well cast the die.

I'll also turn on the "Detailed Economic Report" as well for the rest of this game: these three charts give you a good estimate of what's going on, but we need more numbers especially since, well, we're just observing what's going on once I set the money supply at 4%. We need to know what's going on behind the scenes.


Well, I didn't get thrown out, though my popularity did take a minor hit. Though unemployment had increased, the economy also rebounded, although with less than 1% growth, it's not likely to sustain itself. My position is precarious at best, and I really don't want another horrible random event like the one that started the game.



My popularity actually rose to 41.6%, which I can credit to the increased GDP growth and inflation actually being curbed. Price stability is actually a generally good thing to aim for, at least according to the glossary of this the European Central Bank game:

"Low and stable inflation - or 'price stability' as it is officially called, is the goal of central banks worldwide. ... If an economy achieves price stability, consumers and businesses don't have to worry about changes to the price level. It enables them to plan their spending and savings more easily. It helps the economy to grow, improving job prospects. It particularly benefits people on low or fixed incomes, who are more affected by the negative impacts of inflation than others."

So it looks like we weathered the storm. With my popularity (and the economy) slowly recovering, it means that the gold standard will survive. We should be able to continue onwards without much pain.



Popularity has fallen to 31.4% and we're on the verge of impeachment. How did we get such a sudden turnaround? The reason was this bad random event that caused unemployment to increase and a recession to occur, far more serve than the last recession we had at the start of the game, in 2012. And now that this recession brought down inflation, this (combined with the gold standard) has brought us into a period of deflation, which the ECB does not like.




About the only saving grace was that the 2015 recession was only temporary; it reduced consumption for only one year, so once the consumption returned to full force, economic growth occured on a very brisk pace. This reduced unemployment, and caused my popularity to increase. The invisible hand has bailed us out.


...and is then leaving us alone, not launching any random event at us. Though the deflation problem is a pain, the increase in economic growth and the reduction of unemployment is allowing our regime to keep going. We might be able to ride this through.



I spoke too soon. But even this recessionary pressure, which will increase both inflation and unemployment, is actually welcomed, as it mean that the deflation may soon go away. And besides, unemployment is slowly decreasing anyway due to our economic growth, even with these rainstorms.



Deflation, though still existing, seem to have been mitigated enough for us to once again reclaim the holy grail of price stability, thereby hopefully boosting our economy. With the economy doing well, and people finally getting jobs, and us possessing a continually rising GDP, it looks like the gold standard have led to a prosperity for our hypothetical economy.


History however is not so kind to us.

Spoiler: Gold Standard, Part 2 (click to show/hide)

Though I am concerned about inflation in the long term, in the short term, the unions have pushed inflation up to a level where we will not have to concern ourselves about deflation. In fact, we outperformed "natural output" for a second year in a row; through the power of gold, we are doing better than "normal"! We have returned back to price stability, and hopefully for good. I don't even care that my loyal advisors are imprecise about the GDP growth figures and just round up; the Gold party is still going on. Woo-hoo!



...wait what? Where's the price stability? The constantly increasing popularity?

It went away when GDP growth figures began sliding down, unemployment began picking up, and inflation started rising. And our outperformance of the "natural output" is not to be cheered about, but to scream: a positive output gap implies inflationary pressures...our economy was overheating. To be fair, I don't think an economy could sustain such high GDP growth rates as I had previously had, but we were so reliant on them keeping our economy afloat. If we enter into a period of low or negative GDP growth, then the Gold party is at risk of ending.


The good news is that we no longer have a positive output gap, so inflation fall; the bad news is that a negative output gap means that we are suffering recessionary pressures. GDP growth is falling and unemployment is increasing. Our popularity slowly ticks in a slight downwards direction.



This time, we have a positive event; aggregate demand has increased, bringing up GDP growth rates. But this is a temporary event; it does not impact long-term fundamental decline. It does give a boost to my popularity though.



Inflation is also picking up, due to us having a positive output gap the previous year. Any attempt to tighten the money supply is sure to turn tepid growth into an outright recession that'll drive me from office.


And I can't do anything about the declining growth rate, except pray for a positive random event to occur. I can't change the money supply; that would defeat the purpose of establishing a gold standard. I suppose I could change government spending/taxation levels to stimulate the economy, but that'll cause a non-balanced budget, which is also part of Ron Paul's ideology. Even if I could do something, how would I ensure I won't do something major and cause my outright impeachment? Even if I could succeed in stimulating the economy in the short term, I have to also turn around and raise revenues quickly to make up for the budget deficit, reversing the effects of the stimulus entirely.



This is what I mean by a self-destructing economy back in my introduction to this Ron Paul post: the economy is slowly fading away and dying, only being propped up by the odd positive random event or two, before likely succumbing to a negative event. Even this random event proved to be less stimulating than the last one in 2023.


By intentionally hamstringing my response, I end up with an stagnant economy that is on its last legs. Maybe I can improve on this, maybe I could run a better economy, one that is not reliant on luck or the RNG to keep bailing me out, but based on my own decrees and actions. Perhaps next time though. The "Gold Standard" may have brought this hypothetical economy a period of "price stability", but even stability may not be desirable if this stability means low growth and inevitable loss of popularity for the foreseeable future.

[counting]

Not expected and rarely see someone playing an economic LP game. Good work.

But the static nature of gold standard, almost decide what the outcome will be. Although gold standard can be stable, but one a giant shake-up of the economy will break the entire system. It's so stable hence it's unsustainable in a fluctuated world.

[Bdthemag]

Pickpocketing a crime punishable by death? What is this a backwoods yet conservative nightmare?