The last post included a poll asking for votes on which tutorial to focus on next. The clear winner was the one I had already started on, “Why Central Banks Don’t Control the Money Supply: A Visual Tour of the Macroeconomic Dynamics of Bank Loans, Reserve Requirements, Capital Requirements, and Cash Withdrawals.” The results were useful to see, so thanks to those who voted.

Unfortunately I have nothing but excuses to deliver so far. First, competing priorities have meant too little recent EconViz development effort on my part. Second, I underestimated how complex this tutorial would be to create…

There are a lot of variables and moving parts in the banking system, and describing one often calls for mentioning another, which in turn requires mention of another, and so on… But explaining all these pieces visually and letting visitors control things using sliders and buttons practically requires building a custom model (simulator) of the entire system — which is no small undertaking! The “moving parts” include interest rates (target rate, discount rate, support rate), corridor versus floor system, open market operations, repos, etc. It’s helpful to show banks aggregated but also to split the banking sector to show separate banks interacting with each other. It’s helpful to allow instantaneous visualization of response dynamics (e.g., move a slider to increase bank loans and see bank reserves automatically added in response) but it’s also helpful to break things into smaller steps with discrete control over each step (e.g., let you play the banker by issuing loans then let you play the central bank staff member by conducting OMOs, etc). The bottom line is I seem to be discovering a need for an eventual Banking System Visualizer interactive tool (a bit like the Macroeconomic Balance Sheet Visualizer but with interest rates and other extras integrated).

Another challenge I grapple with is that a thorough description of these dynamics can already be found in blog posts and academic papers, and if I write educational text that isn’t directly related to graphics shown within the tutorial, then I’m just duplicating the effort that went into creating those outside resources without adding anything new and of value. So at the moment I’m leaning toward taking more simplifying shortcuts in how the concepts are presented in this tutorial wherever possible (but still anchoring the concepts to graphical balance sheets etc), and relying on advanced viewers to be willing to supplement using outside resources… with the eventual possibility of a Banking System Visualizer to show all the detailed mechanics.