Widening the spread between rich and poor

Introduction

After global economic crisis in 2007-2009 traditional approaches for stimulating economy growth failed. As a consequence of this a new experimental approach was established, called Quantitative easing. A lot of people think that it is just 'printing money' and putting it into economy. But this is wrong and very narrow minded. In fact, the central bank of particular country buys financial assets (mostly governement bonds) from banks in exchange for new money. The thought behind quantitativr easing is also pretty straightforward, however numbers say that it ceases to work. The first weakness of it is that the money is not put straight into economy (for example through government spending), but it is given to banks. Now when we are in low interest rates situation, it is not very rentable or banks to lend money to people, as with low interest rates and low, but permanent inflation, they in fact get less value that they initially borrowed. So they often go and buy bonds and stocks themselves and thus overheat their prizes. And new money don't get into economy and so the growth of GDP is not promoted in a way, that it was thought. As 40% of stock market is owned by 5% of richest people in the world, it creates unequal distribution of wealth among population. Rich people get richer and poor people get even more poor and promotion of GDP growth stagnates. For example in the UK after wuantitative easing of 375 billion pounds led to 1.2-2% growth of its domestic GDP, what is in numbers 23-28 bn pounds. So we can see how highly ineffective this is.

Model

Variables

For this simulation I will use US economy enviroment.

Global variables

Inflation - rate of inflation will be important during 2. simulation, when i will pressume that majority of new money will be lend to households and companies, thus causing high rate of inflation. If inflation exceeds 2% year growth FED would stop QE.

Crisis - flag, if there is a crisis FED is conducting open market operations using QE. After crisis ends there is period of reviving the economy when QE is conducted in higher rate.

Probability of crisis - Higher the probability, higher the chance of FED going into new rounds of QE in order to stabilize the economy. When there is very low probability and the conomy is thriving, FED would just keep their assets at steady rate, with small purchases of US Treasuries after current ones expire.

Agents

Central Bank

Banks

Richest Stock Owners