the economy as bathtub: a simple explanation
TRANSCRIPT
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Think of money ….
as water
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CITIZENS
ENTERPRISES
GOVERNMENT
LOCAL AUTHORITIES
The economy, then, is like a series of bathtubs. Every month, citizens paytheir bills. The moneygoes to enterprises, government and localauthorities. As the month progresses, citizens continue to payout and have less and less in their accounts.
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CITIZENS
ENTERPRISES
GOVERNMENT
LOCAL AUTHORITIES
Time to refill!As wages , benefits, pensions etc., citizensget money from enterprises, the government and localauthorities.
When you present it like this, it looks as ifthe amount of moneyin the economyis constant. As long as it keeps circulating. However…..
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CITIZENS
ENTERPRISES
GOVERNMENT
LOCAL AUTHORITIES
Every time a citizen buysa house with a bank loan, more money is added to the economy.
As the Bank provides the loan without borrowingmoney itself, moremoney enters the system.
Of course, the bank loanhardly fills the bathtubwith water that can be drained off. People often buy things with that money so you couldthink of houses and cars as bath toys sort of!
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The amount of money tied up in property is huge. Manyhave borrowed more money than they can pay off in their lifetimes.
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BANK
CITIZENS
ENTERPRISES
GOVERNMENT
LOCAL AUTHORITIES
So the system looks more like this, with citizens payinginterest and mortgage to the banks everymonth.
Note that the money”evaporates” when the bank debt is repaid
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BANK
ENTERPRISES
GOVERNMENT
LOCAL AUTHORITIES
CITIZENS’(example Sweden)
Monthly350 Billion
SEK
Available1700 Billion
SEK
Assets4000 Billion
SEK
Citzens own the enterprises and the banks and it is the governmentthat represents them so the model should look more like this
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So how can we tackle….
Unemployment?
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CITIZENS
ENTERPRISES
GOVERNMENT
LOCAL AUTHORITIES
If citizens spent a littlemore money eachmonth and if there wereincentives to employmore people, more jobswould be demanded.
From the model you seethat citizens need spendonly, say, 10% more to stimulate employment. When the jobless get jobs they will start to spend so it is only a temporary measure.
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Time
VAT S
Current
High unemployment, lowerVAT
HIGH EMPLOYMENTRAISE VAT
VAT SURCHARGE EMPLOYMENT STIMULATION MECHANISM
EMPLOY-MENT
100%
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WAIT!
You say ….
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There are so many reasonswhy that won’twork
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The rich wouldn’t allow you
You know nothing about political economy
Companies would just import more
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There are 7 billion reasons why we needan economy that works for us, our planet
and future generations.Join us. Join the dialogue.