ONE small thing to do, but something that could give you an advantage, is to remember then use in your exam the current major statistics about the UK economy:
CPI INFLATION: 3.5% (JAN)
UNEMPLOYMENT 7.8% (JAN)
GDP GROWTH 0.3% (Q4 2009)
TRADE BALANCE -£3.8 BILLION (JAN)
Good phrases to allow you to use these figures in your exam are-
"As can be seen from the current UK inflation rate of ____, .........."
"Unlike nowadays, when the rate of inflation is ______, ............."
"Having an inflation rate like the current UK one of ___, means that a government is likely to .........."
Believe me, few students will do this, yet it shows you have kept up with the latest developments in the UK economy. I think this could mark out your essay as one possibly deserving of a high mark.
I'll make you a deal - I'll update these statistics as they change if you promise to try and use them in the exams!
Notice how closely related the poor economic news and the fall in the pound have been. Combined with all the predictions of no party winning overall control in May's general election, there is a lot of uncertainty about the UK's economic future over the rest of this year, leading this writer to ask
Nonetheless, there will still be a huge government deficit that needs to be reduced. In the run up to the Budget on March 24th, this Telegraph article forecasts no government spending cuts until after the election:
When you click on their names, you get more information, such as this about the new richest person in the world
You can also sort the list by country to see how many billionaires come from yours. The UK has 30 of which the most famous are probablt Richard Branson, JK Rowling, James Dyson, David Sainsbury, the Barclay brothers and Bernie Ecclestone. What about your country?
Click here to see about the world's youngest billionaire, who is 25 years old.
WE all love cartoons. Personally, my favourite kids one is Road Runner: find some on YouTube if you haven't seen it before. I also like Family Guy, but that's not really for kids. What about you?
However, back to the subjcet of economics, here is a cartoon book called "How an economy grows and why it doesn't". Be aware of the point of the view of the author, which you may be able to detect from the url alone. Tell me below which type of economist you think the writer is! http://freedom-school.com/money/how-an-economy-grows.pdf
UK CPI reached 3.5% last month. That is more than 1% more than the government target of 2%.
It is the Bank of England's job to use monetary policy to make sure inflation remains within 1% plus/minus of the target.
Therefore, Mervyn King (Governor of Bank of England) had to send a letter to Alistair Darling (Chancellor of the Exchequer) explaining why he had been such a naughty boy in failing to do his homework correctly. Then Alistair wrote back to tell him not to worry.
These letters are useful for us to read since they show us what the government and B of E are feeling about the current UK economic situation.
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):
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.
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?
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............
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!
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:
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.
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...."
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".
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.
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).
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.
