How to read this — three tiers
Scenario Flow Map
Scenario Flow Map
Actor tiles show share of a teaching £1. Pipes show booked flows at the selected theory and quarter.
Policy doesn't remove pressure. It moves it. Pipes are booked flows; gauges are pressure not yet paid. Click any actor to see what they relieve and what they absorb.
Central Bank sets the rate
Books balance
How to read the machine
- Pipe direction — where the £ moves, payer → receiver.
- Pipe thickness — relative flow strength in this scenario.
- Moving £ icons — ledger-backed money actually changing hands.
- LEDGERReal cash flow or balance-sheet booking.
- VALUATIONMarket-value movement — not cash today.
- GAUGEPressure, risk or confidence signal — not a £ flow.
No pipe without a transaction. No gauge pretending to be cash.
Economy narrative
Plain-English summary of the whole-economy effect per £1 of pressure.
- Households gain 14p of every £1 of pressure.
- Banks lose 26p.
- Pensions & insurers's gilt holdings repriced up by 10p — VALUATION, not cash.
- Borrowing is tighter than Bank Rate alone — effective rate +275 bps (+25 bps from QE/QT + spreads).
- 2p of each £1 leaks to Rest of World.
Diagnostics & audit — signals, distributions, plausibility
Direction Audit
Does the direction of pressure broadly make economic sense? Plausibility check, not a forecast.
6 plausible · 2 mixed · 0 check
Central Bank
PlausibleObserved Squeeze · Expected Squeeze · mixed
Higher reserves interest paid out; APF indemnity pressure rises.
Commercial Banks
PlausibleObserved Gain · Expected Gain · ledger
Rate force lifts lending and reserves income faster than deposit repricing.
Households
PlausibleObserved Squeeze · Expected Squeeze · ledger
Mortgage and consumer-credit drag outweighs deposit relief for indebted households.
Companies
PlausibleObserved Squeeze · Expected Squeeze · ledger
Refinancing costs and cost of capital rise.
Government / Gilts
PlausibleObserved Squeeze · Expected Squeeze · ledger
Debt-service on gilts and refinancing pressure rise.
Local Government
PlausibleObserved Squeeze · Expected Squeeze · ledger
PWLB and service-cost drag rise.
Pensions & Insurers
Mixed but explainableObserved Mixed · Expected Mixed · liquidity
Discount-rate relief can coexist with gilt-valuation and collateral stress.
Rest of World
Mixed but explainableObserved Gain · Expected Mixed · mixed
Foreign gilt holders receive higher sterling income; external financing tightens.
Number Audit
Ledger numbers are the receipts. Indicators are warning lights. Valuations and liquidity pressure are shown separately.
- Raw £ reconciles to Show the Bookspass
- Indicators excluded from ledger totalspass
- Theory overlay labelled separatelypass
- Horizon alignment (Flow Map ↔ Books)check
Theory horizon Q1 shown; books remain Q12 mechanical. Panels label this explicitly.
- Inactive signals hiddenpass
Four questions this simulator answers
- 1.What changed? Which actors' balance sheets moved, and in which direction.
- 2.Where does the pound go? The £1 split between sectors — a ledger identity, not a forecast.
- 3.Who absorbs pressure? Booked flows in versus out for each actor.
- 4.What's only an indicator? Gauges that flag pressure without a cash movement.
1 · What changed? — actor balance sheets
2 · Where does the pound go? — £1 split
Where did the £1 go?
Teaching £1 composition: share of each £1 of pressure within its class. Values never exceed 100p.
Teaching assumptions, not empirical forecasts.
Note on central-bank flows: Bank Rate interest paid by the central bank to commercial banks, and any APF indemnity from Treasury that funds it, are sequential legs of the same Bank Rate operating cost of the central-bank balance sheet — not two independent public costs.
Pressure created by each lever
scenario totals, gross LEDGER- Bank Rate50p pressure created↳ 50p received elsewhereLedger balances
Balanced does not mean harmless: ledger flows net to zero because payments are received somewhere else.
Distributional Tilt
Asset-holder benefit · household / company pressure
- +54p
Household / company / service pressure
Blended household: mortgagors, renters, savers and low-income households differ.
- +21p
Public-sector fiscal pressure
- −69p
Asset-holder income (cash)
Institutional asset holders: effects may pass through to pension members and policyholders over time, not as direct household cash.
- +25p
Asset-holder valuation (mark-to-market)
Valuation pressure on gilt / asset holdings. Not cash today.
- —
External — trade leakage
Cash paid abroad for imports (e.g. energy).
- +6p
External — financial (coupons / interest)
- —
Asset-swap / liquidity shift
QE / QT exchange cash for gilts (or vice versa). The cash leg is shown; the gilt leg of equal size is not a gain or loss.
Central-bank flows are system bookkeeping and excluded from the tilt. Buckets read from canonical LEDGER / VALUATION rows; QE/QT cash legs are reported as asset-swap, not as ordinary income or leakage.
Money flows — teaching £1 split
Share of each teaching £1 of pressure that lands as a real cash flow. Ledger items must balance across the system.
- Bank net money in+36p
- Household net money out(gross +24p / −5p)−19p
- Government net money out−12p
- Company net money out−11p
- Central bank net money out(gross +3p / −3p)−0p
- Rest of world net money in+3p
- Pensions & insurers net money in+2p
Valuation effects — teaching £1 split
Share of each teaching £1 of pressure that shows up as a price revaluation.
- Pensions & insurers net pressure+£1.00
Pressure gauges — teaching £1 split
Share of each teaching £1 of pressure that builds as a teaching signal (risk, confidence, capacity).
- Company net pressure+45p
- Pensions & insurers net pressure+34p
- Rest of world net pressure+21p
Only ledger items have to balance. Valuations and gauges show pressure, risk or market movement. Values shown are composition share of £1. In the default teaching split, each Money-flows row equals the share of £1 shown on the matching Flow Map actor tile.
3 · Who absorbs pressure? — booked flows
Pressure Map
Where pressure moved this quarter
Tip: click any row to inspect the paying actor. Every line is a booked ledger flow; bar heaviness shows relative intensity (red end pays, green end receives).
4 · What's only an indicator? — gauges & signals
These are directional pressure gauges only — not ledger entries and not cash movements. They flag stress that has not been paid yet.
Market signals · Indicator only
Derived feedback channels — not cash flows, not bookings. Teaching proxies for what markets would price.
Sterling drift
+1.00%
Endogenous +1.00% · manual 0%
Higher Bank Rate → stronger £. QE → weaker £. Manual shock adds on top.
Implied Bank Rate path
-17 bps
CPI gauge 1.3% vs 2% target
Where markets would price the next Bank Rate move given the CPI gap. Not an automatic change.
Guided walkthrough (optional)
Display scale
Display scale
PolicyLever is a £1 teaching engine. Scale changes the display size, not the underlying teaching mechanics.
Why did this happen?
Why did this happen?
Mechanical Q1 ledger · Monetary Stabilisation @ Q1The biggest driver right now is Bank Rate. In the ledger, that pressure pushes money out of Households and into Commercial Banks. The theory layer (Monetary Stabilisation) then decides whether that pressure fades, compounds or shifts elsewhere over the next quarters — the Q1 ledger above does not change.
- LEDGER
- GAUGE
- Theory-shaped
- Not a forecast
- Repeating pressure
PolicyLever shows ledger-backed flows, valuation effects and pressure gauges. It is a teaching model, not a forecast.
Theory projection · view controls & Q0 vs Qn
In sync with the Flow Map. Reflects your current levers, projected through the selected school at Q1.
Selected school · Monetary Stabilisation
A credible central bank is the main stabiliser. Use rates to cool inflation, and as inflation falls the pain eases and conditions normalise within a few quarters.
The Q1 ledger does not change when you switch theory. Only the Q2–Q12 path changes.
Mechanics vs Theory-shaped path
Same lever. Same ledger. Different futures.
Left column: the booked Q0 ledger truth. Right column (Q2–Q12) is a theory-shaped path, not a forecast — the same £1 re-weighted through each school's beliefs and the timing family each effect belongs to (fast market, cashflow pass-through, fiscal rollover, real economy).
Theoretical lens
At Q1, all four schools agree — this is the booked mechanical impact. Slide the Theory horizon forward to watch them diverge.
In plain English
A credible central bank is the main stabiliser. Use rates to cool inflation, and as inflation falls the pain eases and conditions normalise within a few quarters.
Core belief
Inflation and demand are stabilised mainly through credible interest-rate policy. Rate pain is expected to ease as inflation falls and policy normalises.
Policy move
Use rates as the main stabiliser; avoid fiscal policy working against monetary policy.
Real-world example
How most modern central banks (Bank of England, Fed, ECB) frame their job. Think Volcker breaking 1980s US inflation, or the Bank of England's 2022–24 tightening cycle.
Technical premise & caveat ▾
Expects: Inflation and demand are stabilised mainly through credible interest-rate policy. Rate pain is expected to ease as inflation falls and policy normalises.
Caveat: Assumes inflation expectations are well-anchored and the transmission channel works on schedule.
| Actor | Q0 · MechanicsLedger truth | Q1 · Monetary StabilisationTheoretical | Δ vs Q0 | × | Drift |
|---|---|---|---|---|---|
| LEDGERCommercial Banks | +£0.24 | +£0.22 | −9.8% | 0.90 | Gain fades |
| LEDGERHouseholds | −£0.12 | −£0.10 | −16.4% | 0.84 | Pain fades |
| LEDGERGovernment / Gilts | −£0.07 | −£0.06 | −3.5% | 0.97 | Pain fades |
| LEDGERCompanies | −£0.06 | −£0.05 | −14.2% | 0.86 | Pain fades |
| LEDGERRest of World | +£0.02 | +£0.02 | +0.0% | 1.00 | Mechanics hold |
| LEDGERLocal Government | −£0.01 | −£0.01 | −4.6% | 0.95 | Pain fades |
| LEDGERCentral Bank | −£0.01 | −£0.01 | +0.0% | 1.00 | Mechanics hold |
PolicyLever shows ledger-backed flows, valuation effects and pressure gauges. It is a teaching model, not a forecast.