Ill again today and I only managed to get 2 hours sleep last night.
To answer some students' queries, our mock exam was never going to happen this week, always going to be next. Not sure exactly when since I haven't seen my timetable yet!
Tuesday, 13 April 2010
Monday, 12 April 2010
No 108: Delayed Easter Egg Competition
BELOW is an article from the "Daily Express" about recent events in the economy. (A bit old now - I first wrote this post over Easter! Still useful to read though.)
Below the article are some questions.
To every student who brings the answers to their economics class on Monday 19th April - I WILL GIVE YOU AN EASTER EGG! (As long as I can still find some, otherwise some substitute chocolate product.)
Easter Holiday Boost as Pound Leaps Against the Euro
1) What are the 3 factors which have led to the rise in Sterling and the FTSE 100? (Hint: 2 are near the beginning of the article and 1 is near the end.)
2) How will the rise in Sterling affect British people going on holidays abroad?
3) Why do finanical institutions want a clear election result?
Below the article are some questions.
To every student who brings the answers to their economics class on Monday 19th April - I WILL GIVE YOU AN EASTER EGG! (As long as I can still find some, otherwise some substitute chocolate product.)
Easter Holiday Boost as Pound Leaps Against the Euro
1) What are the 3 factors which have led to the rise in Sterling and the FTSE 100? (Hint: 2 are near the beginning of the article and 1 is near the end.)
2) How will the rise in Sterling affect British people going on holidays abroad?
3) Why do finanical institutions want a clear election result?
No 107: Competition Policy Story 3 - Naughty naughty Benz
WITH some monopoly power stories is quite difficult to see exactly what a firm is doing wrong, and often economists disagree if what has happened was "against the public interest" - that is, unfair to consumers or other firms in the market.
However, I think that this one is clearly a case of unfair competition:
(Full article here.)
These countries include China, Russia, Thailand, Greece, and Iraq, and the money was mostly given to government officials to get contracts.
Anybody still think this was acceptable? Well, that's your opinion, but at the time Mercedes Benz certainly tried to make sure what they did was secret. Otherwise, why did it use "offshore bank accounts, third-party agents and deceptive pricing practices"?
It has since fired 45 of its employees who involved in this.
2 clear signs that a company may have been doing something naughty. It hides its behaviour at the time, and then gets rid of the employees who were doing it afterwards.
However, I think that this one is clearly a case of unfair competition:
(Full article here.)
These countries include China, Russia, Thailand, Greece, and Iraq, and the money was mostly given to government officials to get contracts.
Anybody still think this was acceptable? Well, that's your opinion, but at the time Mercedes Benz certainly tried to make sure what they did was secret. Otherwise, why did it use "offshore bank accounts, third-party agents and deceptive pricing practices"?
It has since fired 45 of its employees who involved in this.
2 clear signs that a company may have been doing something naughty. It hides its behaviour at the time, and then gets rid of the employees who were doing it afterwards.
No 106: Absence
I SEEM to have caught every virus around these last few months.
I'm just getting over a nasty chest infection, hence my absence today. I am, however, mostly sure I will be at school tomorrow, so I look forward to seeing you all then.
I'm just getting over a nasty chest infection, hence my absence today. I am, however, mostly sure I will be at school tomorrow, so I look forward to seeing you all then.
Wednesday, 7 April 2010
No 105: Election Time!
YESTERDAY Gordon announced that the General Election will take place in one month, on May 6th.
This is what David Cameron hopes
This is those of you who have seen the Alice in Wonderland movie (more about this later)...
The economy will definately be the most important issue in the election which has not been the case for at least the past 15 years, when economic performance was stable.
As a coincedance, yesterday was also the date on which the new rate of income tax started. Anyone who earns over £150,000 will now have to pay 50% income tax on what they get above that amount.
However, the biggest controversy has been over another Labour tax plan which is yet to be introduced.
Next April, there are plans for a rise in National Insurance of 1%. National Insurance is a direct tax which helps to pay for an individual's health care, state pension, etc.. It is paid both by a worker, and by the firm which employs him/her. Therefore, it affects 2 parts of Aggregate Demand, which are..............?
The Conservative Party opposes the rise, saying it will affect jobs. Employers agree. So far 68 bosses of large British firms have signed a letter agreeing with David Cameron and criticising Brown.
Labour have countered that abandoning the rise will lose £6 billion in government revenue at time when it needs the money to pay off its debts and avoid big cuts in spending. The Conservatives argue that the money is better left in the pockets of households and firms.
This in fact follows a time honoured argument between economists: will an economy be helped more by giving government extra money, or by leaving it in the private sector.
Do you agree with Labour or the Conservatives over this issue?
Monday, 5 April 2010
No 104: Russian Interest Rate Cut
.
THIS article will of course be of interest to our friends from Russia.
However, it is also interesting to the rest of us, to remind us that not all countries have very low interest rates, and therefore that some countries are still able to use interest rate cuts in order to boost the economy.
The full article is here, but it doesn't really explain much, Perhaps some of you Russia experts can suggest why interest rates there are relatively high, and how this affects things such as house buying.
THIS article will of course be of interest to our friends from Russia.
However, it is also interesting to the rest of us, to remind us that not all countries have very low interest rates, and therefore that some countries are still able to use interest rate cuts in order to boost the economy.
The full article is here, but it doesn't really explain much, Perhaps some of you Russia experts can suggest why interest rates there are relatively high, and how this affects things such as house buying.
Friday, 2 April 2010
No 103: Competition Policy Story 2 - More about banks
.
THIS one concerns ISAs (Individual Savings Accounts), tax free savings accounts in which every UK adult can invest up to about £10,000 a year.
Those financial insitutions who provide ISAs have just become subject to a "super complaint".
Now you may think you are a big complainer. Or perhaps someone in your family. Or even your Economics teacher. However, none of us qualify to be called a "super complainer".
Super complainers are independent organisations who try to look after consumer rights. If one of these makes a super complaint, the government competition authorities have to investigate immediately.
There are 8 super complainers (here is a list of them from my least favourite website). They include CAMRA, a most excellent organisation that tries to keep beer cheap.
The ISA super complaint in fact has two parts:
(Read full article here.)
I have in fact experienced both of these problems.
My first ISA paid 4.6% interest, far above the Bank of England base rate and well above the inflation rate of the time. I was happy to leave my savings there, until one day I discovered that for six months I had only been receiving the much lower rate of 0.4%. The bank hadn't told me about the change.
Part of government policy to improve competition is to encourage information comparison websites about such products as bank accounts, insurance, home gas and electricity costs and telephone charges.
When consumers find out they can get better a deal with another company it should be made easy for them to switch to the cheaper provider.
Unfortunately though, most of the paperwork has to be done by the company who the consumer is leaving. Therefore, there is little incentive for this firm to do the paperwork quickly. In fact, switching often takes a very long time.
Last year it took 2 and a half months for me to switch my energy provider. My wife wanted to move her phone number from one mobile provider to another, and this took 2 weeks.
Strangely though, this BBC article reports a very high rate of consumer satisfaction with UK banks.
One aspect of economics I love is the detective work - of seeing beyond what seems to be a confusing surface picture to what really is happening.
Does the fact that only 7% of people with bank accounts are likely to switch next year prove they are happy with their accounts? Or is something else happening?
If you post a comment about this, I'll tell my recent experience with this also.
The final sentence of the quote above may help you, as may reading the full article.
THIS one concerns ISAs (Individual Savings Accounts), tax free savings accounts in which every UK adult can invest up to about £10,000 a year.
Those financial insitutions who provide ISAs have just become subject to a "super complaint".
Now you may think you are a big complainer. Or perhaps someone in your family. Or even your Economics teacher. However, none of us qualify to be called a "super complainer".
Super complainers are independent organisations who try to look after consumer rights. If one of these makes a super complaint, the government competition authorities have to investigate immediately.
There are 8 super complainers (here is a list of them from my least favourite website). They include CAMRA, a most excellent organisation that tries to keep beer cheap.
The ISA super complaint in fact has two parts:
I have in fact experienced both of these problems.
My first ISA paid 4.6% interest, far above the Bank of England base rate and well above the inflation rate of the time. I was happy to leave my savings there, until one day I discovered that for six months I had only been receiving the much lower rate of 0.4%. The bank hadn't told me about the change.
Part of government policy to improve competition is to encourage information comparison websites about such products as bank accounts, insurance, home gas and electricity costs and telephone charges.
When consumers find out they can get better a deal with another company it should be made easy for them to switch to the cheaper provider.
Unfortunately though, most of the paperwork has to be done by the company who the consumer is leaving. Therefore, there is little incentive for this firm to do the paperwork quickly. In fact, switching often takes a very long time.
Last year it took 2 and a half months for me to switch my energy provider. My wife wanted to move her phone number from one mobile provider to another, and this took 2 weeks.
Strangely though, this BBC article reports a very high rate of consumer satisfaction with UK banks.
One aspect of economics I love is the detective work - of seeing beyond what seems to be a confusing surface picture to what really is happening.
Does the fact that only 7% of people with bank accounts are likely to switch next year prove they are happy with their accounts? Or is something else happening?
If you post a comment about this, I'll tell my recent experience with this also.
The final sentence of the quote above may help you, as may reading the full article.
No 102: Competition Policy Story 1 - RBS and Barclays
OUR esteemed Head of Department, Mr Bowen, has many theories.
One of them seems to be coming true. It states that when we come to study certain topics in the syllabus, many news events about that topic suddenly appear.
In A2 classes we will be looking next at government action over problems with monopoly power and lack of competition. The past few days have seen several stories about this issue printed in newspapers.
The first features everybody's favourite bank, RBS.
This story from the Independent (read more here) reports that 2 members of RBS were caught telling Barclays' workers some secret information. As those of you who were in last week's A2 classes will know, this is an example of collusion. Presumably they were hoping Barclays would fix their fixes at the same level as Barclays, allowing both to benefit.
How did we find out about it? Barclays told the Office of Fair Trading, and under competition law, anyone who reports anti-competitive behaviour gets much lighter treatment - a bit like if you were to tell a teacher that yourself and a classmate were breaking school rules.
In fact, Barclays don't have to pay anything, even though they might have used the information, and even RBS have had their fine reduced by about £5 million for agreeing to cooperate with the OFT.
This of course makes me feel very happy. The now mostly government owned RBS will be using my LESS of my tax money to pay for a fine for breaking government laws. Is this a new kind of recycling?
No 101: Update to Key Information
.
THERE have been a few changes to the UK macroeconomic indicators.
First was a fall in the rate of inflation in February, partly due to falling home fuel costs.
Second, another update that slightly increases 2009 Q4 GDP growth.
Third, a small fall in unemployment that has not changed the overall percentage.
So now the figures are:
THERE have been a few changes to the UK macroeconomic indicators.
First was a fall in the rate of inflation in February, partly due to falling home fuel costs.
Second, another update that slightly increases 2009 Q4 GDP growth.
Third, a small fall in unemployment that has not changed the overall percentage.
So now the figures are:
- CPI INFLATION: 3.0% (FEB)
- UNEMPLOYMENT 7.8% (FEB)
- GDP GROWTH 0.4% (Q4 2009)
- TRADE BALANCE -£3.8 BILLION (JAN)
No 100: Number One Hundred!!!
LOOKING for something to celebrate this with, I remembered a youtube video from some months ago (maybe you have already seen it).
Crazy things happen when you add Mentos (a type of mint) to Diet Coke.....
Crazy things happen when you add Mentos (a type of mint) to Diet Coke.....
Wednesday, 31 March 2010
No 99: Last week's budget
I'VE just realised that some (!!!!!) of you weren't here for all of my wonderful classes last week, so below are the main points from last Wednesday's Budget.
(For those of you don't know, the Budget - always at the beginning of a new finanicial year - is when the government announces it's tax plans for the next year and discusses the performance of the economy).
I didn't deliberately put the "sin tax" information bigger than the rest................ !
Full details are available here from the Guardian.
Please ask below about anything for which you would like some more explanation.
(For those of you don't know, the Budget - always at the beginning of a new finanicial year - is when the government announces it's tax plans for the next year and discusses the performance of the economy).
Full details are available here from the Guardian.
Please ask below about anything for which you would like some more explanation.
No 98: Who should be Chancellor?
ON Monday, Channel 4 had a debate between the 3 men below, each of whom wish to be the next Chancellor of the Exchequer of Great Britain. Can you name them?
You could watch the hour long debate on 4od (the Channel 4 i player). But time is precious, and boredom is absolute.
Alternatively, read this post from the excellent "Monevator" blog, in which the writer gives his verdict on the 3 men's performances.
Personally, I am finding all the political parties' attitudes a bit similar at the moment.
On one hand everyone is saying that massive cuts will be needed to government spending in order to reduce the government budget deficit. On the other, all are avoiding giving any plans about them. Also, while all of them are attacking bankers, there are few suggestions for regulations to prevent a credit crunch happening in the future.
In fact, if you were an alien who arrived on the planet just in time for last week's Budget, you would have looked at Alistair Darling's new plans for taxation and probably not have realised that government borrowing was such a problem.
But then when there is an election coming, us economists get forgotten about!
You could watch the hour long debate on 4od (the Channel 4 i player). But time is precious, and boredom is absolute.
Alternatively, read this post from the excellent "Monevator" blog, in which the writer gives his verdict on the 3 men's performances.
Personally, I am finding all the political parties' attitudes a bit similar at the moment.
On one hand everyone is saying that massive cuts will be needed to government spending in order to reduce the government budget deficit. On the other, all are avoiding giving any plans about them. Also, while all of them are attacking bankers, there are few suggestions for regulations to prevent a credit crunch happening in the future.
In fact, if you were an alien who arrived on the planet just in time for last week's Budget, you would have looked at Alistair Darling's new plans for taxation and probably not have realised that government borrowing was such a problem.
But then when there is an election coming, us economists get forgotten about!
Thursday, 18 March 2010
No 97: I don't want to be a millionaire any more :-(
HEARD the story about this man, a millionaire who is giving away all of his money because he is unhappy?
This includes the house you can see here, which is worth £1.4 million.
His name is Karl Radeber, he comes from Austria, and he is giving away his wealth of £3 million. Not to you and I unfortunately, but to charities that he has started up.
Read all about it in this Daily Telegraph article.
His name is Karl Radeber, he comes from Austria, and he is giving away his wealth of £3 million. Not to you and I unfortunately, but to charities that he has started up.
Read all about it in this Daily Telegraph article.
No 96: Sugar price volatility
TEST yourself by reading the article below.
The price of sugar has shot up recently, causing demonstrations by sugar consumers in developing countries.
Green is Where the Article Talks About
The price of sugar has shot up recently, causing demonstrations by sugar consumers in developing countries.
- Can you identify what happened to supply which has raised sugar prices?
- What about demand factors?
- What do government do to the price of sugar in certain countries?
- Is there a possible solution?
Green is Where the Article Talks About
No 95: Too many airports!
STRANGE and interesting example of government failure in Japan from the BBC:
So why would the Japanese government build so many airports, and what problems has this caused?
Aiports create a lot of positive externalities (though their level of negative externalities stops them from being classified as merit goods) so building new aiports should increase these.
Generally, improvements in infrastructure are seen as being good for the economy, but I guess this is a clear example where the government has produced a non socially optimum output. Equally clearly, this has wasted many resources which would have a more effective opportunity cost use.
Why has the government done this? Is it simply a matter of a stupid misjudgement of how many airports the country needs? Read the rest of the article here, and see if you can find out the possible answer.
So why would the Japanese government build so many airports, and what problems has this caused?
Aiports create a lot of positive externalities (though their level of negative externalities stops them from being classified as merit goods) so building new aiports should increase these.
Generally, improvements in infrastructure are seen as being good for the economy, but I guess this is a clear example where the government has produced a non socially optimum output. Equally clearly, this has wasted many resources which would have a more effective opportunity cost use.
Why has the government done this? Is it simply a matter of a stupid misjudgement of how many airports the country needs? Read the rest of the article here, and see if you can find out the possible answer.
Sunday, 14 March 2010
No 94: Key Information
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:
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!
- CPI INFLATION: 3.5% (JAN)
- UNEMPLOYMENT 7.8% (JAN)
- GDP GROWTH 0.3% (Q4 2009)
- TRADE BALANCE -£3.8 BILLION (JAN)
"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!
No 93: Newspaper review
STARTING off with a couple of negative pieces of information about the UK economy. From the Guardian:
http://www.guardian.co.uk/business/2010/mar/10/industrial-production-fell-in-january-snow-disruption
A more worrying statistic was the UK trade balance for January:
http://news.bbc.co.uk/1/hi/business/8557200.stm
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
http://blogs.telegraph.co.uk/finance/edmundconway/100004089/is-this-the-start-of-a-sterling-crisis/
However, there is slightly more optimistic news with relation to the amount of government borrowing, as reported in the Telegraph:
http://www.telegraph.co.uk/finance/economics/7436294/Lower-borrowing-fails-to-lift-Treasury-gloom.html
Lower than expected unemployment is an important reason for this, since it has meant government has needed less than previously calculated for benefit payments.
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:
http://www.telegraph.co.uk/finance/financetopics/budget/7436658/Budget-2010-Labour-to-put-off-spending-cuts-until-after-the-general-election.html
Meanwhile, a couple of interesting China related stories.
First, news about inflation that may mean a cut in AD is required:
http://news.bbc.co.uk/1/hi/business/8561381.stm
The continuing argument between the USA and China over the RMBs low dollar exchange rate is the subject of this interesting piece from the Telegraph:
http://www.telegraph.co.uk/finance/comment/liamhalligan/7436875/The-more-America-huffs-about-the-yuan-the-less-China-will-do-about-it.html
(Liam Halligan is a good writer - I recommend looking at some of his other articles).
Finally, not about economics but I bet you watch this clip more than once:
A more worrying statistic was the UK trade balance for January:
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
http://blogs.telegraph.co.uk/finance/edmundconway/100004089/is-this-the-start-of-a-sterling-crisis/
However, there is slightly more optimistic news with relation to the amount of government borrowing, as reported in the Telegraph:
http://www.telegraph.co.uk/finance/economics/7436294/Lower-borrowing-fails-to-lift-Treasury-gloom.html
Lower than expected unemployment is an important reason for this, since it has meant government has needed less than previously calculated for benefit payments.
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:
http://www.telegraph.co.uk/finance/financetopics/budget/7436658/Budget-2010-Labour-to-put-off-spending-cuts-until-after-the-general-election.html
Meanwhile, a couple of interesting China related stories.
First, news about inflation that may mean a cut in AD is required:
http://news.bbc.co.uk/1/hi/business/8561381.stm
The continuing argument between the USA and China over the RMBs low dollar exchange rate is the subject of this interesting piece from the Telegraph:
http://www.telegraph.co.uk/finance/comment/liamhalligan/7436875/The-more-America-huffs-about-the-yuan-the-less-China-will-do-about-it.html
(Liam Halligan is a good writer - I recommend looking at some of his other articles).
Finally, not about economics but I bet you watch this clip more than once:
No 92: It's a sad day for Bill Gates
HE is no longer the world's richest man, as this screenshot confirms below:
http://www.forbes.com/lists/2010/10/billionaires-2010_The-Worlds-Billionaires_Rank.html
When you click on their names, you get more information, such as this about the new richest person in the world
Click here to see about the world's youngest billionaire, who is 25 years old.
Thursday, 11 March 2010
No 91: A Cartoon!!!! How An Economy Grows and Why It Doesn't
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
Tuesday, 9 March 2010
No 90: Mervyn's and Alistair's Love Letters (Again!)
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.
Here is Merv's:
Mervs Letter
And this is what Alistair wrote back:
Alis Letter
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.
Here is Merv's:
Mervs Letter
And this is what Alistair wrote back:
Alis Letter
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