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System Velocity - A Long View

Dan O'Driscoll
Developer

The Velocity and Acceleration of Supply: New Bills Issued​

A simple analysis of the velocity and acceleration of a Government money system - the new bills issued - alongside real-world UK Gilt dynamics from the second quarter of 1974.

Gilt

A gilt is a UK Government liability denominated in sterling, issued by the UK Treasury and listed on the London Stock Exchange. The term "gilt" or "modern-money security" is a reference to the primary characteristic of gilts as an investment: their security.

Model Run Parameter Inputs​

See model runs.

A model run free from interest payments on Government money.

  • Model: ABMLP-X
  • Model Run: virgo-420-23-05-2024
  • Government Expenditure: See Model Input: Real-World Expenditures from the time-series page.
  • Number of Producers: 90
  • Number of Households: 100
  • Taxation rate: 37% (Flat rate; all household agents)
  • Coupon Rate: 0%
  • Interest Rate: 0%

Velocity & Acceleration of Model Bills Issued​

velocity.py
"""
Change in bills issued, from one period to the next,
as percentage of national income.
"""
import numpy as np

velocity_bills = np.diff(df["bills_issued"])
df["velocity_bills_issued"] = ((abs(velocity_bills)
                                / df["national_income"])
                                * 100)
acceleration.py
acceleration_bills = np.diff(df["velocity_bills_issued"])

Analysis Charts & Notes​

  1. The velocity of model bills issued
  2. The acceleration of model bills issued

The velocity of model bills issued chart shows two periods, among others, where the velocity of model bills leads to a similar reaction in the real-world Gilt yield. The period between July 1997 and July 2003, however, shows the trend velocity of model bills issued increasing while the trend Gilt yield is decreasing. When looking at the acceleration of model bills issued chart, we see that across the same period there is actually a negative acceleration trend occurring. The velocity of bills issued may be increasing, but the system is experiencing negative acceleration - to which Gilt yields may be reacting.