Sunday 28 February 2010

No 89: Biggest Stories in the Weekend Newspapers

IT seems like some bankers actually want to cut their own pay (unless it was all a publicity stunt):

http://www.independent.co.uk/news/business/news/us-banks-veto-socialist-pay-in-secret-talks-1912827.html

But the writer of this thinks high banker bonuses are the fault of politicians (and also has some interesting comments about whether google is monopolistic):

 http://www.independent.co.uk/news/business/comment/margareta-pagano/margareta-pagano-condemn-the-politicians-for-rbss-bonuses-1912837.html

Meanwhile, it seems that there is a rescue plan forming for the Greek economy:


 http://www.telegraph.co.uk/finance/economics/7332415/Germany-and-France-agree-to-rescue-Greece-with-conditions.html

though some people are more worried about problems in the USA - time for Arnie to be the (debt) Terminator?

 http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7326772/California-is-a-greater-risk-than-Greece-warns-JP-Morgan-chief.html

 Some of you may have read that the UK GDP growth figure for Q4 2009 was revised from 0.1% to 0.3%. As this article points out though


http://blogs.telegraph.co.uk/finance/edmundconway/100004040/dont-be-fooled-gdp-was-actually-revised-down/

The extent of economic recovery is important, since nobody is sure when the right time will be for cuts in government spending in order to reduce the budget deficit.

http://www.telegraph.co.uk/finance/comment/rogerbootle/7339859/Fiscal-tightening-to-cut-or-not-to-cut-that-is-the-question.html


(LET ME KNOW IF YOU LIKE THE IDEA OF THIS KIND OF SUMMARY OF THE WEEKEND PAPERS, AND I'LL TRY TO MAKE IT A REGULAR POST.)

Saturday 20 February 2010

No 86: Local council smoking misinformation

WHEN we think of misuse of asymmetric information, we almost always discuss private sector businesses giving wrong information to consumers to gain profits (car mechanics, plumbers, dentists, estate agents, etc.).

But here in Sussex has recently been an example of a local government giving out wrong information, as reported here.

Economics argues that the negative externalities of smoking are many. Do you think it is ok to try and to reduce them by any means possible?

No 85: Advanced economics stuff

THESE items are especially for those of you who are aiming high. Those of you who are determined to work really hard over the next 3 months to get that A or even A*.

If that's not you, don't try to read the following, which are advanced economics articles for true economists only............

From the Stephanomics blog, an excellent comparison of Greece's economic problems to the situation in the UK
http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2010/02/greek_britain.html
and one discussing the recent  letter from famous economists to newspapers about whether the government should cut spending or not:
http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/

Next is a very technical but important paper from the IMF (International Monetary Fund). It analyses macro policy before during and after the credit crunch, with some very interesting recommendations:
http://www.imf.org/external/pubs/ft/spn/2010/spn1003.pdf


Finally "Econtalk" is an excellent weekly podcast about advanced economic topics. Listening to a few of these should give a serious boost to your economics.
http://www.econtalk.org/

You may have noticed a more serious tone to my posts recently. This is because we have got to the serious time of the academic year. Start working hard now or regret it when results arrive in August!

Sunday 14 February 2010

No 83: More about Kiva

Please read 81 and 82 first.

ANNA is right to ask about what happens to the money donated through Kiva.

You may notice this post has changed.

I've been doing more research into Kiva, and there seems to be a couple of problems.

First, money does not directly go to the people who you see on the website, but to the Microfinance Bank who lent to them. Secondly, the interest rates charged to poor entrepreneurs by these banks is often high - as much as 50-100% in some cases.

Therefore, time is needed to ponder this and decide if loaning through Kiva is worthwhile or not.

Help me by reading (and giving your opinion about) these:

http://www.scam.com/showthread.php?t=76720
http://blogs.cgdev.org/open_book/2009/10/kiva-is-not-quite-what-it-seems.php
http://digg.com/people/Kiva_A_great_Idea_That_Isn_t_Exactly_What_it_Seemed

No 82: Help me to help someone

PLEASE read post number 81 first.

I've put some money into Kiva. I would like my students to decide where $25 of my money goes.

Therefore, please have a look on http://www.kiva.org/lend at the list of people who would like to borrow money, and tell me your suggestions below.

No 81: Micro Finance Scheme to Help People In Developing Nations

THE BELOW screenshot is from kiva.org. This is a website where you can lend small amounts of money to entrepreneurs in poor countries.


I think this is a really good idea.

Instead of just giving people money, they borrow it, which usually makes them use it more wisely and carefully. Almost all (98.47%) of loans are repaid. The money can then be lent to another person afterwards.

No 80: If you have this job, this is one mistake you should try to avoid

THE GENERAL MANAGER of Chile's mint (the place where its money is made) has recently lost his job.

Look at this picture and try to see why:

 

Read more about it here.

No 79: New non-smoking rules

THE US state of Illinois has introduced a law which bans smoking within 15 feet (about 4.5 metres) of any door or window, as reported in this article.

Anti-smoking campaigners are suggesting similar rules for the UK, possibly helping the government with their recently announced aim of cutting the number of smokers by 50% by 2020.

As this graph shows, smoking is already on the decline in the UK:

 
And here is a summary of the Illinois smoking rules:
 
However, I can see foresee some problems, especially in streets that have many doors and windows. I was trying to find an image that might show this, but I couldn't, so I have used my considerable artistic abilities to draw one for you:

(That is supposed to be a cigarette, not a gun.)

You may now say the English idiom to me, "don't give up the day job...."

Thursday 11 February 2010

No 78: Big Changes in UK Universities - VERY IMPORTANT STORY!!



UK UNIVERSITIES are going to have their government funding cut by 5%. As this article from the Guardian reports,

"Universities across the country are preparing to axe thousands of teaching jobs, close campuses and ditch courses to cope with government funding cuts, the Guardian has learned.

Other plans include using post-graduates rather than professors for teaching and the delay of major building projects.

The cuts are being put in place to cope with the announcement last week by the Higher Education Funding Council for England (Hefce) that £449m – equivalent to more than a 5% reduction nationally – would be stripped out of university budgets.

The University and College Union (UCU) believes that more than 15,000 posts – the majority academic – could disappear in the next few years."

There are 2 issues to look at here:

1) What will be the economic effects of the cut in funding?
2) How will this affect Bellerbys' students (and teachers!)?

As you probably know, university education is usually said to create a large number of social benefits: private benefits to the students who attend, and many external benefits to wider society - more productive workers, higher earners who pay more tax, improved research and development, etc.. Therefore such a cut in funding will probably reduce these benefits.

For example, the newpaper states that, "Teesside University is scrapping £2m worth of scholarships and bursaries that would have helped poorer students". More generally, "student/lecturer ratios are expected to rise, with more institutions using postgraduates and short term staff filling in for professors made redundant".

This all comes at a time when university places are in high demand. Many young adults who would normally want to work are applying  to university, being unable to find jobs in the current economic climate. Therefore, UCAS is going to announce


record numbers of applications for places this autumn. It is expected that as many as 300,000 applicants will be turned away.

By now you may be feeling worried. Don't panic though, this might not be as bad for you as it seems.

Firstly, somewhere between 90 and 150 thousand students didn't get a place last year either. Additionally, due to the problems with getting work described above, many of the applicants this year might not be very good students anyway.

True, this will mean that, according to university principals, "higher exam pass marks will be required to win a place at university". As I always say, you will have to work hard to go to one of my country's fine universities.

However, it is agreed that these cuts mean that universities "expect to become even more reliant on income from higher, overseas student fees", that is YOU!

When universities look at applications, they notice if the student is British or from overseas. I would not be surprised if students from abroad are given better offers in the future as universities look to them to provide more funds.

That could mean more opportunties for you, and more work for me, as more overseas students decide to come to Bellerbys and UK universities.

How do I feel about this? Well, to be honest, part of me is sad, as much as  I like working with you all.

I come from a working class family and was the first member of my family to ever to go to university. It would be a shame if other people from backgrounds similar to mine do not get the chance of a university education.

The government claims that such cuts are necessary in order to save money in the terrible economic situation caused by the credit crunch. However, as the article notes, in the USA "President Obama this week proposed a 31% increase in education spending for next year in order to combat unemployment and develop skills".

No 77: Presentations for end of Module One

HERE are the 2 presentations (Imperfect Information and Government Failure) that I had to rush through in yesterday afternoon's AS class.

Sorry I couldn't spend longer on these, but we economists know that time is one of the scarcest resources. We should be able to return to those topics if necessary in the revision period before the exams.

Information Failure

Government Failure

Sunday 7 February 2010

No 76: Adam Smith cartoon

WOW that last post took a lot out of me, let's take the time to relax with an enjoyable cartoon.

Although, of course, on  this blog there is no innocent fun - even our cartoons must have a good amount of economics in them.

This then, links you to a cartoon version of the most famous book in economics - Adam Smith's "An Inquiry Into the Nature and Causes of the Wealth of Nations" (usually just called "The Wealth of Nations").

A wealth of economic knowledge awaits you there, and hopefully some better jokes than that very poor effort I just made.

See also Post 8 for a cartoon version of Hayek's "Road to Serfdom".

No 75: The End of QE - maybe

IF YOU have been in A2 classes since September, you will know about a new type of monetary policy instrument - quantitative easing (QE). If you haven't, worry not, the pictures later on this post should help to introduce it to you.

On Thursday the Bank of England announced QE was ending (they also kept the base rate at 0.5%).

This is because they have spent all of the £200 billion allocated for QE. Imagine having £200 billion to spend, and doing it in less than a year (QE started in March 2009). Reminds me of this old movie.....


which is obviously what the person who made the picture below was thinking about, too.


But back to the serious economics, here is a link to the BBC news story about the end of UK quantitative easing, which includes the images I've copied below.

 

 
  
There appears to have been a bit of a problem about getting banks to do this. At least some seem to have preferred to have used the free cash to make even more money for themselves by buying shares on the stock markets, which recovered strongly last year. Therefore, we're not really sure yet if all this QE cash has helped as much as hoped.

Or much at all.



 
To be honest with you, I didn't previously know the full story of this final step of QE. So the Bank of England is planning to get its £200 billion back and then to burn it! The reason for this is to stop the extra money staying in the economy and so then to prevent inflation.

There may be buyers for bonds if the economy improves. But this is not all the B of E has been buying with its QE money. There were also the so-called "toxic assets" that the banks had no chance of getting rid of until QE appeared. These were mainly investment "vehicles" derived from repayments on millions of sub-prime ("sub-prime" means "less than the best") mortgages.

This video talks about sub-prime in both a funny and scary way:




I suppose though if the economy recovers, these kind of risky but high paying investments may become attractive again. Hopefully this won't create the same kind of problems these kind of risky but high paying investments caused only a couple of years ago (that led to the need for quantitative easing in the first place).

See also Post 18 for some great videos about QE.

Thursday 4 February 2010

No 74: Presentation about Income/Wealth Inequality Written by AS AM Class

HERE IS a PPP created by my morning AS class. GREAT WORK!

Income and Wealth Inequality

(BTW, I don't want this blog to become just a place for posting class work, so I will be adding some news stories soon!)

Tuesday 2 February 2010

No 73: Buffer Stocks Scheme Presentation

AS REQUESTED, the presentation about buffer stocks, which (trust me!) are not as difficult as they first look.

A good idea is to remember government is starting with a price it wants rather than with price ceilings and price floors on their own, when government is acting against a price it doesn't want.

Buffer Stocks

No 72: Exchange rates presentations

THESE are my presentations I used with you in A2 class about exchange rates. You may find them useful in preparing for Friday's test.

Determination of Exchange Rates 97-03

Exchange Rate Systems 97