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Monetary Mechanics & Macro Trilemmas

Abstractions about the identities and constraints governing money and macroeconomic policy — impossible-trinity-style policy trade-offs (impossible trinity, Mundell-Fleming trilemma, Triffin dilemma) and money-flow accounting (money multiplier, multiplier effect, velocity of money, deposit concentration risk).

7 abstractions in this family — domain-specific abstractions that sit near one another in structural-signature space (k-means over structural-signature embeddings). Each is shown with its short description.

  • Deposit Concentration Risk — Judge a bank's funding fragility by the correlation-adjusted effective depositor count rather than the headline number — coupled depositors collapse toward one bet, voiding the law-of-large-numbers smoothing a large base seems to guarantee.
  • Impossible Trinity — A monetary authority can hold at most two of a fixed exchange rate, free capital mobility, and independent monetary policy because interest-rate parity and balance-of-payments adjustment make the third a residual.
  • Money Multiplier — The relation by which one unit of base money supports up to 1/r units of bank deposits through the chained redeposit of fractional-reserve lending — a causal lever where the reserve fraction binds, but only an ex-post accounting ratio where the central bank accommodates reserve demand.
  • Multiplier Effect — Read the total output change from a one-shot spending injection off a single number — the leakage rate — by recognizing the successive re-spending rounds as a convergent geometric series summing to 1/(1−c) times the injection.
  • Mundell Fleming Trilemma
  • Triffin Dilemma — The structural bind in which a national currency serving as the world's reserve asset must run persistent deficits to supply global liquidity, yet those same deficits erode the confidence that makes the currency worth holding — two roles one issuer cannot jointly satisfy over time.
  • Velocity of money — The average number of times a unit of money changes hands in a period, computed as nominal spending over the money stock (V = PY/M), turning the equation of exchange into an accounting bridge from a money stock to a flow of spending — provided velocity itself holds steady.