We Fixed The Euro Crisis Using Our iPhone!

€conomia 1

The European Central Bank published an iPhone app last week that allows you to simulate monetary policy decisions and see what happens to the economy.

Here’s the goal, according to the game’s glossary:

€conomia aims to give you an idea of monetary policy and of the European Central Bank’s task of setting the key interest rate. In this game your goal is to keep inflation low at just under 2% and stable by adjusting the key interest rate. The interest rate decisions you take can cause inflation to slow down or rise sharply or ideally to be balanced. Achieving a balance between the two extremes is not easy. In the game, as in the real world, decisions take time to have an effect.

But considering the eurozone is facing the worst and most threatening crisis in its history, we’re sceptical that this single mandate is a good policy to pursue.

So we played the game on our terms—with as much regard to growing the economy as keeping prices relatively stable. We started the game with rather ridiculous policy assumptions (we kind of thought it was a joke) by cutting interest majorly right off the bat.

Even so, the game decided that we fixed the euro area crisis by mid-2014.

Try it for yourself by downloading the app here.

The ECB published €conomia for iPod and iPad on October 13.

Getting started...

We didn't exactly want to follow the ECB's mandate.

The game lets you start as early as April 2010.

A team of experts is supposed to help you out.

If you want, you can make some ridiculous decisions.

In fact we made some major interest rate cuts, to the tune of 0.50% starting in late 2011.

The game didn't like that very much.

But we did seem to pop the housing bubble by Q3 2013.

Here is how our decisions affected money growth.

Homebuyers were still complaining in early 2014.

But we did get everyone a job.

And by Q2, the media started to sing a different song.

Admittedly, inflation did top 4%.

But the game decided that the crisis was ending.

And we thought that, if we started dropping rates, we could keep inflation under control.

So we decided that was probably a good idea, and raised rates back to 2.00%.

And by Q3 the crisis was solved!

And inflation wasn't even out of control, at just 2.74%.

Despite our success, the game was angry.

We still think we won.

Obviously, there's a lot more to the crisis than monetary policy.

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