Hearts of Iron IV

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How To Prove Keynes Right: The TNO Economy Guide
By the werediaper
Fun fact: the branding image for this guide is called "Super Jumbo".

If you have no idea how to run a nation's economy, then you're in the right place.
   
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How To Read the GUI


Surprise economy GUI jumpscare!

This is your economy GUI, where you manage your country's economy. Looks complicated, right? Well, don't worry, it's not. Well, it kind of is, but it's really easy to understand at the same time.

I've number-coded each part I'll be talking about for your convenience, starting with

1, 2, and 3. Your Inflation, GDP, and Debt

The easiest to understand out of these three is your GDP, so I'll be starting with that.

Your Gross Domestic Product, or GDP, is "the market value of all the final goods and services produced in a specific time period" (i.e. a year: thanks, Wikipedia) by whatever country you're playing. In more simple terms, it's how much money your country is making in a year. There are two measures to your GDP's value: your real GDP growth and your nominal GDP growth.

Your nominal growth (n) is the projected growth of your nominal GDP, i.e. how much money you're reporting, in a year. This is boosted by national spirits, focuses, decisions, money creation, trade, and the total combined GDP value of all of your states and all "Misc income" boosts, your "GDP contribution" (GDP * 0.135), and your industrial contribution (I have No Clue how this is calculated) as well as your "taxable population" modifier which is either 1 or 0 depending on your women's rights, poverty, education, and child labor laws multiplied by how much money your government is actually taking in. Your nominal GDP determines how many production units you can get, though I haven't found a decent calculation. That sounds complicated, I know. Don't worry. The computer does all that.

Your real growth (r) is the actual growth of your GDP, i.e. how much money you're actually making, in a year. This is your nominal GDP growth subtracted by your current inflation: this is the number you have to pay attention to. For example, let's say your GDP is, nominally, growing at 5% each year, but you have 2% inflation. This means your GDP is, in reality, only growing by 3% each year. Simple, right?

Your Inflation rate is, according to the IMF, "the rate of increase in prices over a given period of time". In-game, inflation is a lot simpler than that. All your inflation does is subtract itself from your nominal GDP growth, which results in your real GDP growth. Inflation rises due to money creation, unchecked spending, and sudden increases in GDP growth, i.e. by cheating or annexing another country. Your inflation will always rise with your GDP, and while counting your pennies is a decent choice it's not always the practical one. As long as your inflation rate isn't higher than your nominal GDP growth, then you're good.

Debt is, simply, how much your government owes to foreign and domestic creditors. This doesn't make sense for every nation to have, but apparently everybody does. Anyways, your debt is increased by spending while under a deficit and decreased by spending while under a surplus. More on that later (when we get to your reserves), but for right now, the amount of debt you can take on is impacted by your credit rating. Higher credit ratings let you take higher and higher amounts of debt (to the point where that number can be infinite), and lower credit ratings do the exact opposite.

4, 5, 6, 7, 8, and 9. Your Economic Sphere, Yearly Deficit/Surplus, Surplus/Deficit Rate, Expenditures, Revenue, and your Reserves

Your Economic Sphere determines who you're allowed to trade with. A nation in the CPS's sphere would get less favorable rates and sometimes even be unable to trade with nations in the OFN or Einheitspakt, for instance.

Your Yearly Deficit and Surplus numbers are important! If you're spending more money than you can take in, i.e. spending a surplus that's too large (which is represented by the green text turning red), then your inflation and debt are going to grow out of control. At the same time, if you're hoarding too much money, then your reserves will be bloated and you'll not be re-investing as much money back into the nation: resulting in your growth plateauing. You should never have an excess a mount of money in your reserves, and it's always prudent to use it to either pay your debt or invest back into your country to raise your growth directly. You can see how much your yearly deficit/surplus is compared to your real GDP growth by analyzing the Surplus/Deficit Rate percentage beneath it.

Your Expenditures and Revenue are how much you're spending and making in a year. It's generally wise to keep your military expenditures as low as possible and your civilian expenditures as high as possible: a healthier and happier population results in less poverty, more population growth, and a more active economy, meaning your economy will grow faster. Military confrontations are so rare in TNO that it's not worth keeping your money high on it while playing any country that's not Russia or the USA before the '64 elections. Below this are the Tax and Austerity buttons: civilian and military austerity should always be on, and so should tax cuts if you can afford them. Tax cuts decrease income but increase growth, and civilian and military austerity both increase income by reducing spending: generally, you can get the GDP growth from cutting taxes for a pretty good deal since the vanilla factory system means so little in TNO.

Finally, your Reserves are the money you're not spending. Hoarding too much results in plateaued growth, and as long as you have debt then all the money that is either actively in or would go to your liquid reserves are instead used to automatically pay down your debt: this isn't a bad thing. If you want to, you can turn this feature off and instead manually control it, which could be useful if you're in dire need of GDP growth.

10. Economic Crises

TNO has seven economic crises: six are vanilla, while one is exclusive to Burgundy. Your seven vanilla ones are

  • NEGATIVE REAL GROWTH: Your real GDP growth is lower than your inflation rate. Either increase your GDP growth and/or lower your inflation.
  • INFLATION CRITICAL: Your inflation rate is so high that your money is becoming worthless. Either reduce spending, stop printing money, and/or reduce inflation.
  • EXTREMELY HIGH DEFICIT: You're spending more money than you can afford. Reduce spending.
  • CRITICAL DEBT: Your debt is too high. Reduce spending, run a surplus, and pay back your debt.
  • BLOATED RESERVES: You have too much money in your reserves. Start running a deficit to pay it off to your debtors and/or invest as much money as you can. You can only invest one time per year.
  • FISCAL CRISIS: Well, you're ♥♥♥♥♥♥.
  • BURGUNDIAN FISCAL CRISIS: In around 1963, Himmler shoots his own economic minister. Burgundy is in a permanent state of Fiscal Crisis from this point onwards. Have fun.
How to Prove Keynes Right: or, Recap
You want to maximize spending as much as possible while keeping inflation as low as possible. To do this, max out your social expenditures and reduce your military expenditures to their maximums (or as high/low as you can get without that "YEARLY DEFICIT" turning red). If you can afford to, cut taxes; if you have to, raise taxes. Always be on either "Fresh Off the Presses" (for GDP growth) or "Count Our Pennies" (for inflation reduction). Debt is automatically paid if you have a deficit or if you have reserves while you still have debt, but always keep an eye on it. The higher your credit rating, the more debt you can afford. Watch out for fiscal crises and do your best to counteract them. Raise and lower taxes as necessary. If not at war, always be on both civilian and military austerity.
3 Comments
Darth_Chef 11 Apr @ 5:45pm 
Thank you for this amazing economic lesson... Now will this be on the test ;)
cløudie 18 Feb @ 12:35pm 
I love Burgundian economics wtf is a military-industrial complex
Peoples Commisariat 17 Feb @ 8:04pm 
vic2 economy in hoi4? Hooray! wE Love maP gaMe Economies!