The terms behind the Transmission Machine. Plain English. Cause and effect, not forecast.

What it means

The unit of account in the UK economy. A label on a claim — one party owes, another is owed. Not every pound is the same kind of pound. Some pounds are cash, some are deposits, some are reserves, and some are assets priced in pounds.

Why it matters

Every flow in the machine is denominated in pounds. A penny and a billion travel the same pipes; scale changes magnitude, not structure.

In Mathanics

Pounds move along pipes between actors. Each move is a booked ledger entry — money does not appear or disappear, it changes hands.

What it means

Physical notes and coins issued by the central bank. A direct liability of the state.

Why it matters

Cash is a tiny share of the money supply but the only form that needs no intermediary to settle.

In Mathanics

Mathanics treats cash as a small subset of household and company balances. The interesting plumbing happens in deposit money and reserves.

What it means

Money held in a bank account. Spendable, but technically the bank's promise to pay you.

Why it matters

Most money in the economy is deposit money, not physical cash. It is created when commercial banks lend, and destroyed when loans are repaid.

In Mathanics

Deposit money appears as spendable £ flows between households, companies, banks and government. Every flow has a matching ledger entry on both sides.

What it means

Deposits commercial banks hold at the central bank. Used to settle payments between banks, and earning interest at the Bank Rate.

Why it matters

Reserves are how banks pay each other. After QE, reserve balances are large, so the interest bill on them is also large — and the APF/Treasury operating-cost leg follows from the same Bank Rate move.

In Mathanics

Shown on the Commercial Banks ↔ Central Bank pipe. The interest leg and the APF indemnity are presented as the same operating-cost family, not two independent expenses.

What it means

A real, booked transaction — cash actually moves from one balance sheet to another.

Why it matters

Ledger flows are the truth of the economy. If the books do not balance, the machine refuses to run.

In Mathanics

Shown as solid pipes carrying £ glyphs, and tagged with the green LEDGER badge. Open Show the books to read the underlying double-entry record.

What it means

A change in the market price of an asset someone already owns. No cash changes hands today.

Why it matters

Valuation effects make people feel richer or poorer without any flow occurring. They matter for behaviour, but they are not income.

In Mathanics

Tagged with the amber VALUATION badge and shown separately from cash ledger flows. Gilt-price moves under changing yields are the canonical example — booked on holders' balance sheets, never as a government cash cost.

What it means

Two parties exchange one asset for another of equal value. The books balance; nobody is richer or poorer at the moment of the swap.

Why it matters

Many central bank operations are asset swaps, not spending. Conflating the two is one of the most common mistakes in monetary commentary.

In Mathanics

Shown as dashed pipes labelled ASSET SWAP — a money leg and an asset leg moving opposite ways, paired into one balanced transaction. QE and QT are the canonical examples.

What it means

A flow that leaves the domestic circuit — money paid abroad, or to a sector that does not re-spend it.

Why it matters

Leakages reduce the multiplier of domestic policy. A pound that leaves the country does not stimulate anything at home.

In Mathanics

Visible as flows into Rest of World or Energy (external). The Inequality lens and Who gains / who pays panels make leakages explicit.

What it means

The category a policy lever belongs to. The engine routes transmission through the same family of channels for every lever in that family.

Why it matters

Grouping levers by family makes the machine predictable. A monetary lever always runs through rate expectations, bond yields, financing conditions, currency and confidence. A fiscal lever always runs through disposable income, demand, government borrowing and distribution.

In Mathanics

The five active families are Monetary, Fiscal, Supply (real), External / FX, and Financial stability. Each family has a distinct icon set, colour treatment and channel vocabulary.

What it means

The interest rate the Bank of England sets and pays on reserves. The anchor for almost every other rate in sterling.

Why it matters

Bank Rate moves the price of money — borrowing costs, savings income, and the cost of refinancing existing debt — for households, companies and the government.

In Mathanics

Owns the price-side channels: mortgage and deposit interest, reserves/APF operating cost, and refinancing on the existing gilt stock. It does not directly drive energy bills or the FX rate — those have their own levers.

What it means

Interest paid by the central bank to commercial banks on the reserves they hold at it.

Why it matters

Since reserves are large after QE, the bill for interest on reserves is large — and it flows from the central bank (ultimately the public balance sheet) to commercial banks.

In Mathanics

A ledger flow from Central Bank → Commercial Banks. Visible in the books as a real cash transfer, not an accounting abstraction.

What it means

The recurring cost of paying interest on borrowed money. For the government, the cost of servicing outstanding gilts.

Why it matters

When yields or rates rise, debt service rises too. It is a real, ongoing cash flow — not a one-off.

In Mathanics

Split into two LEDGER channels: the price side on the existing gilt stock (owned by Bank Rate) and the quantity side on new issuance and rollover (driven by fiscal levers, priced at the effective borrowing rate). Both balance against gilt-holder receipts on the credit leg.

What it means

Replacing a maturing or callable debt with a new debt at the current market rate.

Why it matters

Higher rates only reach the existing stock of debt as it refinances — not all at once. This is why the price-side debt-service effect is gradual.

In Mathanics

Bank Rate moves are booked as refinancing pressure on the existing gilt stock, never as an instant repricing of all government debt.

What it means

When maturing debt is replaced by new debt of the same kind. New gilts cover redemptions plus any new borrowing.

Why it matters

Each rollover happens at today's effective borrowing rate, so the quantity of new issuance and the rate at which it is issued together determine future debt-service cost.

In Mathanics

Fiscal levers (government spending and tax changes) drive the borrowing need; rollover cost is priced at the effective borrowing rate from the rate-transmission gauge.

What it means

The central bank buys gilts from the private sector, paying with newly created reserves. An asset swap, not spending.

Why it matters

QE changes the mix of assets in private hands (more reserves, fewer gilts) and tends to push yields down. It does not, by itself, put money in households' pockets.

In Mathanics

Shown as dashed ASSET SWAP pipes: gilts move one way, reserves/cash move the other. Gilt-price support is shown on VALUATION; borrowing-cost relief sits on the market-absorption GAUGE — never double-booked against the swap itself.

What it means

The reverse of QE. The central bank lets gilts mature or sells them, removing reserves from the system.

Why it matters

QT shrinks the central bank's balance sheet and tends to push yields up. Active sales below purchase price book a realised loss to the public balance sheet.

In Mathanics

Same dashed ASSET SWAP pipes as QE, running the other way. Gilt-price pressure is shown on VALUATION; market-absorption / financing-cost pressure sits on the GAUGE — never as a separate cash debt-service flow.

What it means

Money paid out by the government to households, companies or other sectors — benefits, pensions, subsidies, grants.

Why it matters

Fiscal transfers are real spending. They change disposable incomes immediately and ripple through the rest of the economy.

In Mathanics

Solid LEDGER pipes from Government → recipient sector. The flow direction and thickness show who receives and how much, relative to other flows in the scenario.

What it means

A policy lever that restricts or widens access to borrowing, rather than changing its price. The mechanism is access, not cost.

Why it matters

Tightening credit access has different effects from raising interest rates. Some borrowers are price-sensitive; others are excluded entirely when the gate narrows.

In Mathanics

The mortgage-lending-rules-tightened lever is the canonical credit-gate scenario. It routes through mortgage availability, housing demand, first-time buyer access and financial stability — not through the interest-rate channel.

What it means

A UK government bond. An IOU from the Treasury that pays interest (coupons) and returns the principal at maturity.

Why it matters

Gilts are how the government borrows. They are also the asset central banks buy and sell in QE and QT operations.

In Mathanics

Gilts move between Government, Commercial Banks, Pensions & Insurers, the Central Bank and the Rest of the World. Fiscal levers (government spending up or down) drive the borrowing need and rollover; price moves on existing gilts are shown as VALUATION on holders' balance sheets.

What it means

A pressure, risk, confidence or capacity reading. Not a £ flow — a signal about the state of the system.

Why it matters

Some of the most important things in an economy are not flows: borrowing costs, currency strength, market absorption, household stress. Gauges show them honestly as readings, not as money.

In Mathanics

Tagged with the slate GAUGE badge. Gauges never create pipes and never change ledger balances — they sit on dials and dashed channels alongside the flows.

What it means

The return an investor earns on a bond if they hold it to maturity. Moves inversely to price.

Why it matters

Yields are how the market prices the cost of government borrowing and the riskiness of holding the debt.

In Mathanics

Shown as a gauge, not a flow. Higher yields raise the cost of refinancing existing debt over time (price-side debt-service channel) and lower current gilt prices (valuation channel) — booked separately so they are not double-counted.

What it means

The total size of a scenario's effects across LEDGER, VALUATION and GAUGE channels, before the £1 panel rebases composition to 100p.

Why it matters

Composition and magnitude answer different questions. The £1 panel can look similar across two scenarios while their total pressure differs by a lot. Twelve active levers across five families are mapped in the current engine.

In Mathanics

Shown on the Transmission Machine alongside the £1 panel as “Scenario pressure vs baseline”. Moving one lever can change magnitude without changing composition much — that is expected.

What it means

The strain a policy move puts on a given actor — the gap between what they receive and what they owe.

Why it matters

Balance is not fairness. Equilibrium is not equality. Pressure shows who carries the strain when the system re-balances.

In Mathanics

Each actor card shows a pressure label (Trace · Light · Moderate · Strong · Heavy) and a coloured edge for net gain or net loss.

What it means

The opposite of pressure — an actor's net position improves as a result of the policy move.

Why it matters

Every policy creates winners as well as losers. Relief makes the upside visible alongside the cost.

In Mathanics

Actors with positive net equity change carry an emerald edge and a ▲ marker on their card.

What it means

A compact, graphic summary of an active scenario. A three-second read of the shape of a shock before the full transmission panel loads.

Why it matters

Users need to understand what a scenario does before diving into channels, actors and stress points. The soul gives them the shape instantly.

In Mathanics

Shown as a Shock Signature card with a tone-driven visual beam (pressure, relief or mixed), a one-sentence soul line, and three fields: who is squeezed, who is offset, and where the inequality tilt sits. No raw £bn values, no internal ids.

What it means

A single short sentence describing the core mechanism of a scenario. The heart of the Shock Signature.

Why it matters

In one sentence, a user can grasp what the lever does — before they see any pipes, actors or numbers.

In Mathanics

Rendered at the top of every Shock Signature. Generated from the same scenario data as the transmission, not a separate narrative. Examples: ‘The price of money rises.’ ‘The state injects demand.’ ‘The credit gate narrows.’

What it means

A qualitative level of intensity for a scenario, not a free-form numeric input. Larger bands intensify the same channels without inventing new mechanisms.

Why it matters

Exact macro forecasting is impossible and misleading. Qualitative bands let users explore ‘what if it were bigger’ while keeping the transmission structure honest.

In Mathanics

Bank Rate Rise runs Signal (+25bps), Standard, Forceful, Stress and Damage. Bank Rate Cut has a matching descending set. Other levers use analogous bands where applicable. Each band still passes strict scenario validation.