Nov 10 2008

Time for a New Model Economy?

What this is and what this isn't.

This is an experiment in using the web to gather and present data. If I get something useful as a result, that would be nice,but I don't expect any of this to have any effect on anything.

The Global Economy has changed & We Haven't

I would like to announce that I have detected a clear pattern in the actions of our financial leadership:
A problem erupts, Washington throws an unprecedented amount of money at it.
The problem gets worse,
Washington throws an amazing amount of money at it.
The problem gets worse,
Washington throws a astounding amount of money at it.
The problem gets worse,

First, Examine the Data

My starting point is to see what data is available on the web, and then to see if I can orgainze and present this data in a new and useful way. What follows draws heavily on the ideas of Edward Tufte, plus some of my own: Large quantities should have more visual impact than small quantities, a model should provide visual analog of the real event, etc.
This sketch is a first pass. Red = dollars. A complete chart would show all the dollars in the world as the combined area of all the red squares. My earlier researches give a figure of 776 billion for 2008.
Connectors between countries are currency flows. The width of the pipe is the volume of trade. The bars at the midpoint of the pipes represent the composition of the trade flow. Balanced trade flows are white, unbalanced flows are that currency color. Thus the pipe between the US and China is all red because it's all dollars going to China and no yuan coming to the US. The one between the US and Europe is half red meaning that the flow of euros to the US is half the volume of the flow of dollars to Europe. If Europe were running a deficit, then the bar would have a blue stripe in proportion to the deficit. My chart shows India running a deficit in trade with China and China settling the account with dollars. This needs work because it shows an imbalance but it's ambiguous which way the imbalance is going. I'm not going to worry too much about this now because I have no idea whether it is true and I might spend a lot of time refining my model to handle a condition that doesn't exist.
The currency blocks should be normalized so that equal values are equal areas thus a thousand dollars and one hundred thousand yen would be boxes of approximately the same size. The red square in the USA box would have sub-components like currency in circulation, time deposits, etc. I'd like to be able to zoom in on the box and see finer details. Obviously any serious attempt to model the world economy would take years, but I plan to chip away at this as time allows. And in keeping with the subject, I promise that if I do win a Nobel prize to blow all of it in a wanton display of irresponsible profligacy.