Recessiomics - Bring back the 'Phillips' water pump finance computer (with an added nuclear reactor - to show inflation).

There has been of late a kinda glee from followers of the Micheal Keynes economic model. Since every government on the planet has embarked on massive stimulus buyouts, lump sums and everything else they can do to stave a huge wave of deflation (depression style...would it be that bad?). Tiny bounces in economic activity has occurred as taxpayer funded stimulus washes through the global economy (we have already talked about a runaway bull market in stocks and some currencies).

William Phillip was an economist from the 1950's. He created the worlds first analog financial computer MONIAC 'Monetary National Income Analogue Computer' (above), actually it was a machine that used water to show the ebb and flow of liquidity (money) through a economic cycle (using colored water). Simplistic as it was, it however allowed people to physically see how money can move from parts of society and back again.

But in someways apart from complex mathematical algorithms that detailed financial formulas represent, one cannot dismiss the unknown aspects of variables (Taleb's Blacks Swan theory). If Keynesian followers (goverments) are now downgrading inflation (as they are at the moment) with a very old inflation equation and quoting from Micheal Keynes. They actually miss the simple point that the global stimulus will be flushed out of the economic system, as goverments will go broke and a global tax shortfall will drain anything back into goverment accounts. Starving the private sector of funds and according to their theory, private funds would then replace the goverment liquidity. Of course this is a fallacy especially at a time when prices are going upward. Yes, currently food, oil, amenities, insurance, transport costs, even mortgage rates are all on the rise; the denial of inflation is quite bizarre.

Mix inflation with goverment deficits, global shortage on raw materials and high unemployment, which are all occurring in tandem, this is all gonna end in tears. As there will be no advantage for private investment and expansion in an stag/inflation environment - with goverments taking anything left.

We all could have just taken the deflation pain (cheap stuff though!) and rebuilt our economies from the ground up.

Still with central banks and governments running a massive Keynes bet (with our money). If William Phillips had ( for arguments sake) built a little nuclear reactor into his machine to show the balancing act of inflation (hot reactor - high inflation, a cool reactor - deflation). The reactor would be just about to go into a critical meltdown, as one of his students would be saying, 'why is the core red hot and smoking'?