No 171: 2010 in 9 Charts

I HAVEN'T before simply just copied an article straight into this blog. However, this recent article from "The Economist" is so informative, so useful, that I believe EVERYONE of you should try to read it, even though it is fairly advanced in places.

CHARTS OF 2010 - A YEAR IN NINE PICTURES

THE global property bust that pulled the world into recession in 2008 began to lift in 2010. House prices turned up in Britain and stabilised in America (chart 1) but slid further in Spain. The process of deleveraging kept rich-world inflation subdued (chart 2) while robust demand and loose monetary policy let it accelerate in India and China. By late 2010 output and employment had turned up in most rich countries but not enough to regain pre-crisis levels (chart 3).

Bowing to American pressure, China allowed the yuan to rise slightly (chart 4); higher inflation meant that in real terms it rose considerably more. Japan watched in alarm as a rising yen (chart 5) threatened its export-led recovery. Europe trembled as its sovereign-debt crisis undermined the euro.

Rich-world budgets remained deeply in deficit but at least those gaps generally shrank, most of all in countries, like Greece, undergoing austerity (chart 6).

Sadly, austerity did not provide the hoped-for relief: peripheral European government-bond yields continued to rise relative to Germany’s (chart 7).

Bonds’ best days may be over everywhere. In emerging markets and America bond prices increased through most of 2010 (chart 8) then fell as America’s economy sprang to life and investors flocked to equities. Commodities trounced both stocks and bonds (chart 9). Bulls attribute this to global growth, especially in the emerging world; bears cite a desire for inflation hedges. The tension between them will drive markets in 2011.

No 170: GDP Forecasts for 2011

FROM "The Economist".....

No 168: Fun with Google Ngram

THE tools on "Google Labs" are really cool. For example, Google Ngram allows a user to search the millions of books scanned into Google Books, to find how often different words or names have appeared in the past.

This can be very interesting for us economists.


For instance, this is what happens if you search using "inflation" and "unemployment":

 

Let's be clear what this graph shows: how often books contain the words "inflation" and "unemployment" between 1800 and 2008.

Firstly, it is clear that few writers talked about either inflation or unemployment until about 1870. This is probably because early Economics was almost universally concerned with microeconomics.

Inflation is the first of the 2 terms to start to be written about, but it is overtaken by unemployment in about 1905. Both of the terms, but especially unemployment, show a huge increase during the Great Depression of the 1920s and 1930s.

After World War 2, the incidence of inflation increases and that of unemployment falls, perhaps due to the Phillips' Curve and its emphasis of the correlation between the two. In the 1970s, inflation leaps up to the same level as unemployment, at the same time as the world economic crisis of the time which saw high levels of both.

The peak for both came during the recession of the early 1980s.

Since then, the frequency drops, possibly due to the relatively good economic climate until the Credit Crunch. It will be interesting to see how it has increased during our current economic crisis, in a few years when the data is available.

Here are some more Ngram graphs:

Not quite sure about Karl Marx's popularity around 1700, about 120 years before he was born! I guess this also shows how Adam Smith's has continued to be a very important figure, even when Marx was at his most influential.

Two more - war and peace first:

How about tea and coffee:

Come on, then, why don't you have a go? Just go to Google Ngram and then tell us about the graph you made.




(Technical note: choosing the option to search through "English One Million" gives a more even sample over the different years.)

No 167: Three More Student Stories

SO we're now on to the third set of story summaries written by A2 students. Once again I am impressed by the high standard of English and Economics shown in this work. Well done!

However, I teach 17 A2 students and have only received 11 stories...... oh dear some of you may be in trouble! 

DEMONSTRATIONS AGAINST TAX AVOIDANCE by Kana Maniwa

On December 4th, in some cities in the UK such as London and Brighton, there were demonstrations against tax avoidance of the owner of Topshop, Sir Phillip Green. They criticise not only Sir Green but also the government itself by saying "If you want to sell your products, pay your tax" and "Nick Clegg, shame on you, shame on you for turning blue". This event gives warning and criticisms of the government regulation over tax.
 
http://www.dailymail.co.uk/news/article-1335632/Sir-Philip-Greens-flagship-Topshop-closes-protests-taxes-cause-mayhem.html?ITO=1490

UK MANUFACTURING 'POWERING AHEAD' by Alan Chan

The revival of the UK manufacturing sector is due to the strong demand from overseas consumers and a big improvement in productivity, which gives a big hand to the country's recovery as it currently accounts for 13% of the UK's total economic output. However, to maintain the revival of the sector, government should also play a role in it,such as put in more spending,or make some looser policies to attract the firms to make even better performance in certain sectors.


http://www.bbc.co.uk/news/business-11921894

SNOW CAUSES DISTRIBUTION PROBLEMS by Rauan

Due to weather conditions the Royal Mail is currently not providing its guaranteed next day delivery. Also Amazon one of the retailers said that items might be delayed. Moreover some of the petrol stations had problems in getting fuel into certain areas, especially in Scotland. On the other hand, because there are fewer vehicles on the road during these days, there is less demand for petrol.


A spokesman for the Department of Energy and Climate change said that fuel supply companies are doing their best in order to supply road transport fuels, however in some parts of the UK, weather conditions are causing problems.

In addition the Independent Retailers Association stated that in Scotland and East England many independent petrol retailers are in danger of running out of petrol and diesel. Those filling stations that are in rural areas are most vulnerable.

Tesco, one of the UK’s largest petrol retailers said that all their tankers are operating and that there are no stations closing down or reporting shortages. Together with other supermarkets Tesco had no problems with food supply shortages.

However, current weather conditions affect positively on other businesses. For example Marks and Spencer reported that demand for thermal clothing in past weeks had grown by 121%. Furthermore Asda sold about 100,000 de-icers for car windows.

So according to Howard Archer early changes in weather had impact mostly on retailers.

ttp://www.bbc.co.uk/news/business-11904765 

No 166: Next Four Student Stories

FOUR more excellent news story summaries from A2 students. Good work!

AMERICA'S JOBLESS RECOVERY by Abdul Abdulrahim

Nearly in every sector the U.S. seems to be picking up pace, spending has been become strong, and the latest figures on pending home sales suggest that even housing markets may be coming back from their deep slump.

The growth seems to be everywhere except one of the key areas —labour markets. Employment in America turned in a surprisingly poor performance in November, indicating that recovery is not creating enough jobs.

The unemployment rate rose to 9.8%, its highest level since April and close to the 10.1% recession peak. At 15.1m, the number of unemployed workers rose back to its April high (though some of this increase was due to new entrants to the labour force).

Many of these workers are now rely on unemployment benefits. Congress has yet to reauthorise the emergency benefits package, as it has done so many times through the recession. Some 2m jobless workers may lose benefits by the end of 2010, and perhaps 4m or more will lose them by April (The Economist).

The November figures may be revised up in future months to show a better performance (like the previous months). The U.S. labour markets has yet to generate job growth sufficient to bring down the unemployment rate of the country. However the pace of recovery has been improving. All the same, policymakers in Washington considering the extension of unemployment benefits and tax cuts should pay attention to the obvious weakness in labour markets. They can and should make sure that November's number remains an anomaly(out of what is expected).

 (http://www.economist.com/blogs/freeexchange/2010/12/americas_jobless_recovery&fsrc=nwl)

OIL PRICES REACH POST-CRISIS TWO-YEAR HIGH by Eunice Aw

Oil prices reached a record high since the financial crisis in 2008.

The factors that contributed to this rise in oil prices included an increasing demand for oil due to the global economic recovery and the cold weather.

The rising demand is also due to the weakening of the US dollar. The weak US currency makes oil less expensive as it increases the purchasing power of currencies that gain in value against the dollar. Hence, the demand for oil increases. However, the producers may restrict the supply of oil as they are earning less profit from the US dollar. This results in a rise in oil prices.

http://www.bbc.co.uk/news/business-11917152




SPANISH AIRPORTS FACING POST-STRIKE BACKLOG by Dheeya Rizmie

The unexpected, unofficial strike of air traffic controllers in Spain has lead to the forced cancellations of numerous flights, both departing and arriving in Spain, with more than 250,000 people being affected. The strike came after the government decided to introduce a period of austerity (in order to reduce their budget deficit) which may severely affect the wages of controllers. This decision came after an ongoing dispute acout their work hours.

http://www.bbc.co.uk/news/world-europe-11921539


FUTURE UK GROWTH by Valerija Artemjeva

The economy will grow by less than expected in 2011(the UK's GDP was predicted to be 2.2% but now the it is predicited to be 1.9%), but growth in 2012 will be better than predicted, the British Chambers of Commerce forecasts. It upgraded its GDP growth forecasts for 2012 from 1.8% to 2.1% - but that was still significantly lower than the OBR's 2.6% estimate.

http://www.bbc.co.uk/news/uk-11920548

No 165: World Clock

HERE is a screenshot of the "World Clock":

As you can see (but not too clearly, trying a different screenshot app....) the clock shows you information about different stats about the whole world: births, deaths, prison growth, car production.

However, to get the real fun out of it, you need to actually watch the clock in live time: click here to get to it.

Right, I'm going to watch the clock for the next 60 seconds and see what happens in the world....

Ok, I'm back. In the world in the last 60 seconds there was:

• a 147 person growth in world population due to
• 256 births minus
• 109 deaths of which
• 22 were because of cardiovascular problems, 2 from traffic accidents, 1 from poisonings and also
•  1 illegal immigrant entered the USA
• 2 couples got divorced in the USA while
• 88 abortions took place across the world
• 25 hectares of forest were lost
• 57,851 barrels of oil were produced and also
•  69 cars, 208 bicycles and 161 computers.

I'll let you into a secret: the ends of term  are always stressful times for teachers - topics to finish in class, tests to set and mark, reports to write - and in such times is good to be reminded of the incredible restless relentless busy-ness of the crazy planet we live upon, and how our own problems and stress are just an insiginificant molecule in all of it.

Wow, got all of a bit philosophical there, apologies!

No 164: First Four Student Stories

SO HERE are the first of the summaries written by my A2 students about recent economic stories. Good work everyone!

EUROPEAN COUNTRIES AND THE EURO by Queena Wong

Countries in Europe like Spain, Italy, Portugal and Ireland are still in recession. Confidence in these countries decreased as the cost of insuring government debts rose sharply. The cost of insuring indicates the high risks of government repayments. This has led to the Euro falling to a 10-week low.


(See

http://www.guardian.co.uk/business/2010/nov/30/eurozone-rocked-by-debt-crisis )

   

IS HAPPINESS ALL ABOUT MONEY? by Yana Geshko


In the article ideas about human well-being and income are discussed. Should government put people's happiness above people's prosperity as the aim that drives their policy- making decisions? Though peoples' answers don't show that money is everything, they usually make a decision relying on the possibility to save or earn money. 


(See : http://www.economist.com/node/17578888 )

CAMERON'S HAPPINESS INDEX by Iris

David Cameron has asked the Office of National Statistics to measure the country's "general well-being" in terms of what is known as the index of happiness. The government is intending to use this statistical information when it comes to policy making.However,this rather creative new strategy is not favoured by the majority of people who is concerned about the feasibility of this,because it is not only difficult to define "happiness",but is also time-consuming to collect data from a large and representative sample.

 http://www.economist.com/economics/by-invitation/questions/should_governments_pursue_happiness_rather_economic_growth

 CADBURY AGREES TO KRAFT'S TAKEOVER BID by Rachel Yoo

Cadbury will benefit from the supply chain of a larger company.

For example, its addition to the Kraft will allow the combined company to have an even a broader reach around the world.
Also, there is a big chance to generate cost savings.

However as Cadbury, the 186-year-old British company, was acquired by an American company there were public protests, asking to “Keep Cadbury British”.

 http://stocks.investopedia.com/stock-analysis/2010/What-Happens-When-Kraft-And-Cadbury-Merge-KFT-CBY-WEN-MCD-TGT0127.aspx?partner=tickerspy

 

No 162: Some Interesting Numbers from "Private Eye"

I DON'T have a particular newspaper that I read every day. However, I do make sure that every week I read "The Economist" (which hopefully you have heard of already), and "Private Eye".

You can probably tell from this week's cover the kind of magazine the Private Eye is....

In my opinion, satirical magazines like this, who watch very carefully what government and other powerful people do, are extremely important. This may be why usually one of the first acts of a dictator is to close down these kinds of publications. Plus, Private Eye is funny!

However, I am not the only person who believes in the importance of having a strong opposition to the government.

As reported in last weeks "Economist":

"In a video shown on state television, President Dmitry Medvedev said that Russia’s political system was showing signs of “stagnation”, and that the lack of serious opposition meant that Russia’s ruling party, United Russia, was in danger of “bronzing over”."

Now I don't want to say too much about Russian politics, since it not something I know a lot about. However, it does seem to me a bit strange that one of the leaders of a political party which has been well known for trying to silence opposition, is now complaining because now there is no opposition.......

In any case, back to "Private Eye". One feature I like in it is called "Number Crunching", and here are a few examples:

 

No 161: Strange Story 3 - The Irish Government Cheese Plan

THE world economy grew more in the 1990s than in any other time in human history.

For example, between 1995 and 1997, the world's GDP grew by more than during the 10,000 years from 8100 BC to 1900!!!

Of all the countries of the EU, the Republic of Ireland gained the most. Unemployment fell from over 15% to 5%. GDP growth averaged 7% each year from 1994 to 2004. GDP per capita rose from 66% of the EU average in 1986, to 111% of EU average in 1999 (significantly higher than in the UK).

The government policies that seemed to have led to this success were deregulation, encouragement of foreign investment, and very low corporation tax rates of 11% (whereas in the USA, it is 35%)

However, as the graph below here shows, the fall of Ireland during the Credit Crunch has been just as spectacular.

In all, GDP fell by 13.5% in 18 months.

The average wealth of a household fell from E95,000 in 2006, to E51,00.

The Irish banks needed billions of euros of help from the government.

In 2010, the government will borrow funds equivalent to 32% of the whole country's production.

In recent weeks, the country's situation has got so bad that the Irish government has been forced to accept 85 billion Euros of loans from the EU and the IMF.

At the same time, they announced 10 billion Euros of cuts in government spending, and 5 billion in tax rises.

Understandably, the people of Ireland are angry, as you can see in this picture:

But, have no fear people of Ireland, because your government has thought of a plan, and although it may not solve all the problems straight away, it is will surely make everyone feel much better. The plan is....

CHEESE!

That's right, the Irish government has bought a very big piece of cheese and every household in the country will get some of it!

Brendan Smith, the agriculture minister, said the plan was "an important means of contributing towards the well-being of the most deprived citizens in the [EU] community".

However, the plan has made some Irish people extremely angry:


One caller to a radio show said: "Have they taken leave of their senses? It's not cheese that people who have lost their jobs that people are worried about, it's about how they're going to tell their children or grandchildren that Santa has very little money."


"What are they going to tell their children and grandchildren: that Santa has cheese instead?"

Another said: "This is just crackers. The scheme is full of holes. This is the last straw - it's really grated on the whole community." 

Further Reading

Independent news story about the cheese

BBC story about the recent loans to Ireland

No 160: California Against The World

HERE's a very nice infographic, helping us to remember just how important the US economy is to all of the rest of us.

Before we see it, just a reminder of the biggest economies in the world:

1 United States $ 14,120,000,000,000 2009 est.
2 China $ 8,818,000,000,000 2009 est.
3 Japan $ 4,149,000,000,000 2009 est.
4 India $ 3,680,000,000,000 2009 est.

The important point here is not that USA IS NUMBER 1!!!!! (As American like to say.)
 
It is more that the US economy is about the same size as China's, Japan's and India's added together.
 
No wonder that the Credit Crunch proved the old proverb still seems to be true: "If the USA sneezes, the rest of the world catches cold."
In fact, as the infographic shows, even individual states of the US have enormous economic power:

 Click this to see it: California Against the World Infographic

You may also like to look at one of my favourite ever maps, showing US states and the countries whom have an equivalent size to them - click on the link below:

Post No 37: Your country compared to US states

No 159: Strange Story 2 - Cyberspace Leisure Club Sold For Over $600,000

LAST week saw the sale of the most expensive part of a video game ever.

As this story reports, a player of the online game "Entropia" bought an asteriod in the game for $100,000 last year. He converted it into a virtual leisure club, then sold it  last week for $635,000.


This are some pictures of what someone has just bought, "Club Neverdie":

 A great place to have a night out while you're having a night in, you could say.

According to this page about the club, there are over 1000 apartments, 5 clubs, 20 domes for hunting, a place to go mining (!), and a mall featuring 66 shops.

Here's the promotional video:




What do you think, was it a good investment to pay $635,000 for Club Neverdie?

Special Post: Students' Oligopoly Presentations

THIS past week my A2 classes have been making presentations on different topics about oligopoly.

Below are some of the presentations, which all show an excellent level of hard work and understanding. Great stuff everyone!

NON-PRICE COMPETITION IN MONOPLY by Grace Xu

Non Price Competition

(Full screen URL: http://www.scribd.com/full/44918270?access_key=key-1lqz4io0t68ugrf7ocvv )

OTHER METHODS OF PRICING by Kana Maniwa

Kana Other Price

(Full screen URL: http://www.scribd.com/full/44918874?access_key=key-1wyepd99pargmvqv0ywm)


THE PRISONERS' DILEMMA by Ira Che Ghani and Abdul Addulrahim

Prisoner's Dilemma

(Full screen URL: http://www.scribd.com/full/44919133?access_key=key-1m3zbkrlulaxvfhrgu02 )

Link to game show illustrating game theory in action
http://www.youtube.com/watch?v=p3Uos2fzIJ0

No 158: Strange Story 1 - No more wizards in Russia (unless they get a license

IMAGINE this situation. Two men come up to you claiming to be wizards. They say that if you give them all your money, they will take it away and then use their skills in magic to triple the value of your cash. So if you gave them, for example, US$35,000, they would convert it into US$105,000.


Would you give them your money?

Well, as this story reports, and in the video below, such an event recently happened in Moscow.



It appears that similar situations have led the Russian parliament to make a law to control the "country's flourishing industry of self-styled wizards and psychic healers by banning advertising and requiring them to acquire licenses".

This makes me wonder: what do you have to do to get a license to be a wizard?

Maybe some kind of competition...

No 157: Newspaper questions for Wednesday 10 November

 

Page 6 - "Train fare rises being used to ease peak-time congestion"
Do you think the rises in fares will ease peak-time congestion on trains?

Page 11 - "Move to Biofuels Will Add Carbon"
Biofuels have been praised as providing a solution to the use of petrol. Does it seem to be a good solution?

Page 41: "Forecasters predict oil will reach $200 a barrel"
Why?

Page 42: "Gold hits record high of $1,420 per ounce"
Why?

Page 42: "Trade deficit narrows slightly"
Why?

 

No 156: Newspaper Stories for Tuesday 9th November

PAGE 10: "Cameron Enlists Fashion Leaders to Court Chinese"
Why does the British government hope 'China rebalances its economy' by raising workers' wages?

Page 18: "Smokers Not Quitting"
What does the article suggest is a more important influence on smokers than the price of cigarettes?

Page 19: "Web Giants at Loggerheads Over Sharing Users' Data"
Do you think it would be better for Facebook and Google to cooperate or compete?

Page 43: "Sky Gives a Hint of Its Power"
Give an argument in favour of the UK government stopping News Corp taking over the rest of BSkyB.

Page 45: "Britain Avoids Double Dip, Says OECD"
What does the OECD think will happen to the UK economy?

No 155: Newspaper questions for Monday 8th November

FOR anyone outside my A2 classes, every Monday, Tuesday and Wednesday we have been reading stories from the new 20p "i" newspaper.

(Here is a BBC news report about the paper if you are interested.)

Here are the stories and questions for today:

Page 3: "Internet Biggest Browers (Diagram)"
What do the diagrams suggest about the market structure for internet browsers?

Page 4: "Channel 4 Reporter Exposes British Sweatshops Supplying Big Retailers"
Make an argument in favour of British companies using sweatshops such as these.

Page 4: "Archbishop Warns on Jobless Plan"
Do you support the government's idea of unpaid manual labour for the long-term unemployed?

Page 41: "Falling House Prices Tempt First-Timers"
Are falling house prices good or bad for the economy?

No 154: The Spending Review in 2 minutes

SORRY, no time at the moment to offer detailed comments about the spending cuts (see post 151).

However, here is a list of the main measures:

• £81bn cut from public spending over four years
• 19% average departmental cuts - less than the 25% expected
• £7bn extra welfare cuts, including changes to incapacity, housing benefit and tax credits
• £1.8bn increase in public sector pension employee contributions by 2014
• Rise in state pension age brought forward
• 7% cut for local councils from April next year
• Permanent bank levy
• Rail fares to rise 3% above inflation from 2012

And a short video....

No 153: If you think your classes at Bellerbys are boring, it could be worse....

No 152: Funny Videos About The Recession

FIRST of all, these Australian comedians discuss the debt problems of European Union countries:



Next, here are some British economies explaining financial markets and the credit crunch and why the banks needed to saved:



This (http://www.youtube.com/watch?v=mzJmTCYmo9g) links to many more Bird and Fortune videos.

No 151: Here Come The Cuts........

WEDNESDAY will see the UK Government's "Comprehensive Spending Review". 

This will possibly shape the future of the UK economy for the next 5 or 10 years.

To find out all about it, download then print out this document and follow the instructions:

 Download web challenge

------------------------------------------------------------------------------------------------------------------
Introduction
The UK Government has spent £1 trillion on helping the economy, and more particularly the banks, during the credit crunch.

The Conservative-Lib Dem coalition government believes that spending cuts need to be made so that government borrowing can be seriously reduced. Apart from health care which has been "ring-fenced" (protected against cuts), they are asking each department to cut somewhere between 20-25% from their spending.

On Wednesday 20th October, Chancellor George Osborne will announce the details. Nobody is sure what will be cut. However, estimates say about 600,000 government workers will lose their jobs over the next few years.

What Would You Cut....?

From the BBC, this allows you to play around with diffferent possible government spending areas that could be cut:

http://www.bbc.co.uk/news/business-11069101

Stephanie Flanders video 

The BBC's Economic Correspondent gives her summary of the issues raised by the Spending Review:

http://www.bbc.co.uk/news/business-11180768

What would you save and cut?

Members of the UK population give their opinions:


http://www.bbc.co.uk/news/11503212

Further Information

Videos of 2 famous economists and their opinions

Will Hutton  - We Deserve A Fair Society


Phillip Aldrick - Cuts Are Austerity-Lite


Cut Or Spend - What the IMF Really Thinks

No 150: Help with New Economics Words

ONE difficulty with studying economics is that there are so many new words to learn.

It is sometimes useful then, to have access to dictionaries which give you the meaning of these words.

There are many available on the internet. Some start with basic economics terms, others are for advanced students.

My advice if you don't know a word is look in more than one site, because you might find the way a word is described in one place is easier for you to understand than in another.

Here is a guide to some economic glossaries I think are useful:

1) Bized economics glossary - this is good place to start since it is written for A-level students.

2) The Economist magazine's glossary - from, of course, the best magazine in the world, which, of course, you are all reading every week. It is written for eductaed people who may not have studied economics, so should be quite easy for you to understand.....

3) AMOS web glossary - size is the advantage of this one, with over 3000 economics terms discussed. It is from the USA, so beware of some words which are different from those we use in the UK.

4) Dr T's Economic Glossary - written by a university teacher, this uses advanced language to describe the economic ideas you may already know. Better for A2 students than AS.

5) John B. Taylor's Principles of Macroeconomics - very advanced;good for those of you who really want to challenge your understanding.

6) The Concise Encyclopedia of Economics - as the title suggests, not so much a dictionary as a series of short essays. Very interesting, but be aware that there is a bias to the writers of these essays - they are Austrian School economists (put very simply, very much in favour of the free market and against government).

If you want to buy an economics dictionary, this old one is still one of the most excellent available. I have a copy so if you'd like to have a look, just ask.....

http://www.amazon.co.uk/Everymans-Dictionary-Economics-Collected-Arthur/dp/0865975523/ref=sr_1_5?ie=UTF8&s=books&qid=1286971170&sr=1-5

No 149: Of billions, trillions and debts

I'VE been looking for some ways to visualise the huge amounts of money that governments owe.

Remember that "budget deficit" refers to the money a government borrows over a year, wheareas "national debt" is all of the money a government owes from borrowing in the past.

I've already posted about the UK debt clock (see Post 67 and http://www.debtbombshell.com/) and the Billionpoundagram visualisation (see Post 67 and billion-pound-gram).

Here's an article about current UK government borrowing: uk record borrowing. This is the key information:

"TheUK's budget deficit rose to the highest level since at least 1993 reaching 15.3 billion pounds in August....

"...economists expect the deficit to be .... 149 billion pounds in 2010."

This sounds a lot but it's hard to imagine. Economists usually compare these big numbers with the total value of all production in the country. On this measure, the deficit for 2010 will be equivalent to about 10% of UK GDP. In other words, the government borrowing for this year will be the same value as 10% of all the goods and services made in Britain.

However, a billion of something is hard for us to imagine. This video may help....



Trying to find visualisations of a billion then led me to trying to do the same about a trillion. Whenever I hear the word "trillion", I often think about the US national debt, currently about $13 trillion!

Here is the debt clock for the USA: http://babylontoday.com/national_debt_clock.htm.

I am now going to pause writing this blog and see how long the clock will take to increase by $1 million.....





Right, back again, it took 22 seconds. Therefore, US national debt is increasing by $1 million every 22 seconds!

Much of this is interest payments, calculated to be around $383 billion this year. Of course, this leads to an enormous opportunity cost where money that could have been spent on providing government goods and services is spent on interest payments. But also remember that if a government doesn't pay its debts (known as "defaulting") it won't be able to borrow money in the future, or if it can, it will be at even higher levels of interest. And then it won't be able to pay back the interest so they can borrow more money to make the interest payments.......

There is a clock in New York which shows the US National Debt. A couple of years ago there was a problem with it:



If a billion is hard to imagine, a trillion must be even more difficult.

These 2 visualisations may help:





One last number to draw attention to: the total cost of the government spending caused by the credit crunch so far has been .... $10,000,000,000,000 (10 trillion).

Although actually this is only up July 2009 (see this BBC article).

Recently, some economists have been arguing that the Bank of England needs to put even more money into the economy to make sure we do not fall back into recession (time for more QE?).

No 148: Possible reading for students wanting to study economics at university

SOME students have been asking me about economics books they can read in order to help their university applications.

Here are some recommendations:

1. Predictably Irrational by Dan Ariely

This is a book about "behaviourial economics", the use of experiments and theories from psychology to better understand economic behaviour. This book challenges traditional economic ideas about how we make economic decisions. It's also very funny!













2. Ship of Fools by Fintan O'Toole

This book discusses the rise and fall of the Irish economy over the 1990s and 2000s. The country was praised around the world as the best example of how deregulation, low taxes and foreign investment could led to very high growth rates. Before it all went spectacularly wrong during the Credit Crunch. It's GDP has fallen by 14% between 2008 to 2010, and has the world's highest debt to other countries - equivalent to 811% of GDP. This book argues the stupidity and greed of Ireland's politicians and business leaders caused this.






3. The Storm: The World Economic Crisis and What It Means by Vince Cable

Vince Cable is currently the Miinster for Trade in the UK government. He was one of the few people to warn about the problems that eventually dragged this country into the Credit Crunch. This is a short and readable account of those events.












4. The Death of Economics by Paul Ormerod

This book was written some time ago, but is still excellent. It is good for those students who also know some maths. The central idea of the book is how the maths and stats used in making economic forecasts is wrong, and how this has led to completely wrong decisions and theories.










If you would like some more suggestions, here is a longer list from tutor2u:

http://www.tutor2u.net/blog/index.php/economics/comments/revised-reading-list-for-economists-post-as-papers/#extended