No 213: UCL Conference. Global Economic Outlook. Part 2.

A FORECAST of future economic situation considering whether there might be a new global economic crisis was an important part of the speech held by Dr. Linda Yueh. 
This possible forecast was based on summing up different aspects of economic growth.

In our view, one of the most interesting data was a comparison of nowadays’ recession with recessions during different economic situations the humanity has already experienced.

The graph clearly illustrates that the pattern the world economy is following during current recession is between crises of 1991 and the Great Depression. It can seem not as bad as it could be, however, if during the first year of the recession its speed was the same as Latin American crisis (which would have meant that economy could have been relatively easy to be restored), nowadays the speed of the recession is closer to the Great Depression rates. This means that in order to restore global economy with the lowest costs, fast measures should be taken to not allow the economy fall as it did during the Great Depression.

These worries can be supported by another graph shown by Dr. Yueh.

This illustrates the output gap during the last 30 years. We can compare the output gap of European countries in the begging of the 90ies when Europe was experiencing exchange crisis mentioned in the previous graph and the figure for these countries nowadays.

As can be seen, European countries shown in the graph had mostly positive output gap. The United Kingdom had a negative one, however the figure was not so significant as it was slightly above -1 per cent, compared to -6 per cent that it had in 2010. Other countries had their gap lower than -5 per cent in 2010. 

However, in 2009 all the figures stopped dropping and the whole pattern had flattened a little.

by Galeeva Dariya

No 212: UCL Conference. Global Economic Outlook. Part 1.

   On 10 December the economic conference was held in UCL and some Bellerbys students found it particularly interesting to visit. One of the presentations was made by Dr. Linda Yueh who was investigating the global economy and the engines of growth of countries nowadays.
   In her presentation "Global Economic Outlook: Engines of growth", Dr. Yueh discussed several issues of modern economy that we found really important.

  As can be seen from this graph, the recession in the period between July 2008 and March 2009 mostly affected high income countries that managed to start recovering far later than developing countries. However, it is evident that the speed of recovery was almost equal in all the countries covered by the research. Moreover, if to compare the patterns of developing countries before and after July 2008, it was Chinese economy that made their economic growth slower before the crisis, nonetheless, it was Chinese economy that caused the most part of development afterwards.
  It is remarkable that according to the World Bank data, high income countries have entered the stage of new recession, whereas developing countries are continuing to grow. Yet, it is quite difficult to predict whether  these trends are going to continue in the future or not.
By Galeeva Dariya and Zaytseva Alina.

No 211: What's been happening and what's going to happen

HI there folks!

I know that some of you have been visiting over the past few months, and that it seems like this blog has taken a rather long holiday.

I was very busy getting ready for the Maths exam from hell in October, and since then I have had a lot of other things to be getting on with.

I do plan for this blog to continue, but unfortunately I cannot carry on doing it all myself.


I'd love it if some of you wanted to write something for the blog. Please let me know if you are interested at.....

sirspottiswoode@gmail.com

On Summer Holiday: Back on 16th August (just before A-level results!)

No 210: Govt spending v Govt Borrowing

EITHER of these topics could be in the exam tomorrow. However, be careful, they are not exactly the same.

Think about yourself for a moment: are the reasons you spend money the same as the reasons why you might need to borrow money? For example, are you likely to borrow money just to buy food? Are you likely to need to spend money every day? Are you likely to need to borrow money every day?
 

In other words, governments need to borrow money to spend only on certain things, and only at certain times.

We know that govt borrowing is necessary when G > T. Therefore a govt will need to borrow if there is a sudden increase in G and/or a sudden fall in T. What could cause such situations to happen? 

In a question about the effects of government borrowing, you can refer to some arguments about the effectivess of government spending. I would say, "some economists argue that since govt spending for demand mangement is ineffective, therefore they should not borrow money to finance this" and give some reasons for it. 

But what you are really looking for are the effects of the borrowing itself. These could be: 

• higher interest payments mean govt has to reduce other areas of spending or raise taxes (as we have seen with Cameron's spending cuts);
• possible need for bail-out (ECB and/or IMF) which would lead to even tighter fiscal policy;
• reduced confidence in the govt's ability to manage the economy sucessfully, particularly affecting future government borrowing;
• inflationary risk if govt increases money supply to pay borrowing or deliberately causes inflationary pressures to reduce the real cost of borrowing;
• financial crowding out;
• an unacceptable burden of debt passed on to future generations.

Try to read about what is happening in Greece at the moment to give you a sense of the real-world consequences of excessive govt borrowing.

Also be careful not to mix up the base rate of interest and the rate government pays on bonds.

The first is the rate offered by govt to buyers of govt debt. The second is the rate govt lends to banks. 

The rate on bonds affects the amount of interest govt will have to pay back in the future. It does not affect the other interest rates in the economy, particularly those for households and firms. It might though affect the attractiveness for banks of lending to govts or to businesses/consumers. It could affect the exchange rate too, as described next.
 
If the govt wants to borrow a lot more, possible lenders become worried since they are more concerned about the govt's ability to pay back its debts. In order to attract them, the govt offers a higher rate of interest (called the yield) on its bonds. 

This might attract foreign investors if the bonds are thought by them to be a good mixture of reward compared to risk. In such a case demand for the currency would increase, causing an appreciation. 

However, at the moment no-one wants to buy Greek govt bonds, even though, for example, the yields on 2 year bonds are 28.24%!!!
  

No 209: tutor2u prediction of key areas for Module 4

THIS morning tutor2u contains a prediction of possible contexts that could turn up in the exam:

• The consequences for the UK economy should the US economy experience a double-dip recession

• The economic consequences for the UK of natural disasters such as flood, drought, tsunami (external shocks) and economics of global price volatility

• The fast-changing role of the Chinese economy and its implications for the UK

• The impact on the UK economy of major instability of the euro

• The impact on the UK economy of the newer membership of the EU 

This link connects to the tutor2u post, which also contains links to presentations about the above topics and exam advice.

tutor2umodule4advice

On exam advice, this is what they say about ending your essay:

A conclusion is essential and should not just repeat earlier points.
A supported final judgement is a criterion in the Level 5 mark band (i.e. to get 22+)
Leave yourself 4-5 minutes for a final judgement of 5-6 lines. This is time proportionately well spent. Try to incorporate a new idea, e.g. how a policy may impact on different parties; how the policy may have different short v long run effects.

No 208: A useful TV programme

IF you need a break from revising, there is a useful TV programme being shown tomorrow (Monday 20th) on BBC2 at 9 o'clock.

It is now available on BBC iplayer:

http://www.bbc.co.uk/iplayer/episode/b0125v5h/Made_in_Britain_Episode_1/

"Made in Britain"

Episode 1

Who says we don't make anything any more? In the first of a three-part series on how Britain pays its way in the world, Evan Davis busts the myths that we were wrong to let so much of our manufacturing go abroad, and that we have become a nation of shopkeepers, bankers and estate agents.
As he flies in the world's most revolutionary jet and drives one of the world's fastest supercars, he discovers Britain still makes a lot it can be proud of. But post crash, he asks is it enough to meet the country's bills.

No 207: A few ideas about Module 4

ONE of my students has just e-mailed me to ask whether I have any ideas about topics for the Module 4 exam. I thought it might be useful for all of you to see my reply:

Dear (student),

A number of us teachers think that issues relating to government borrowing and budget   deficit (what the newspapers call "sovereign debt") may come up. It might be a good idea to read about what is happening at the moment with regard to Greece and its debts.

In addition, Mr Bowen thinks the topic of "rebalancing" may come up. This means the shifting of an economy from one area to another in order to improve its performance: e.g. from relying on domestic demand to expanding exports, from one particular industrial specialisation to another, from producing goods to producing services, etc..

As always though, these are just guesses so don't neglect other areas of the syllabus. On Monday I am going to send everyone a list of the key areas of Module 4 compared to Module 2 so you can check you have covered all the main areas in your revision.

I hope the Module 3 exam went ok today. If you have time to write back, I'd like to hear about your thoughts regarding the exam.

Please e-mail me if you have further questions and please come along to lunch next Friday!

Best wishes,

Mr Spottiswoode

 In addition here are some pictures that might help you....

No 206: Some last minute stories of interest

HI there! Hope your revision is going well!

Here are some last minute stories before the exams that might be worth reading.

1) Chancellor announces new banking regulations and sale of bank shares
New regulations are going to be introduced to force banks to "ring fence" (separate) the retail and invstment parts of their organisation. The government is also planning to sell the shares in Northern Rock that were bought during the Credit Crunch, thereby privatising it.
 http://www.bbc.co.uk/news/business-13770746

http://www.bbc.co.uk/news/business-13783765


2) MS fine 
Microsoft has been fined £178 million by the US courts for using a patented piece of code in its Microsoft Word software.
http://uk.news.yahoo.com/microsoft-must-pay-copyright-cash-084855404.html






 3) Worlds most valuable currency

 It's called the "bitcoin". Have you heard of it?
http://uk.finance.yahoo.com/news/The-world-most-valuable-yahoofinanceuk-945291950.html






4) China inflation
 Inflation in China is set to rise to 6% next month. This is first time since China has been the second largest economy in the world that it has experienced sustained infaltionary pressure. How will this effect the global economy?
http://uk.news.yahoo.com/china-inflation-may-top-6-percent-june-expert-044616876.html

No 205: North Korean TV produces happiness index

No 204: Key issues and stats for macroeconomics

THE table below summarises the important economic indicators and the most important current issues about them.

	Now	B4	Current Issue(s)
Economic Growth	0.5% (Q1 2011)	-0.5% (Q4 2010)	2011 total growth forecast to be 1.4% - is this sign of a recovery?
Inflation	4.5% (CPI April)	4.0% (CPI March)	Should interest rates be raised to control inflation, or will this endanger recovery?
Unemployment	7.7% (Q1 2011)	7.8% (Q4 2010)	Will government job cuts be replaced by private sector jobs? 20% of 16-25 year olds are unemployed.
Current Account	-2.9%   (of GDP Q4 2010)	-2.4%   (of GDP Q3 2010)	Can exports (low exchange rate / manufacturing) help lead the recovery?

No 203: Some very useful last minute resources

HERE are two very useful resources for you to look at before the Module 2 exam tomorrow, both from tutor2u.

This links to a post which talks about how important it is to provide some context in your answer. That is, to connect your general economic analysis with some current events in the UK economy.

Advice on use of context     

As you should all know, the basic economic background in the UK at the moment is that we are just about starting a recovery after a very deep recession, although it is uncertain how quickly the situation will improve.

The next link below is about tutor2u's prediction for the exam. They think that inflation may feature in the exam tomorrow, since it has not in recent exams and the rate of inflation is very high at the moment.

What you should revise about inflation

Good luck tomorrow and remember......

No 202: Revision notes on unemployment

THIS links to a post on Tutor2u which briefly summarises all the main information on unemployment for both the AS and A2 exams:



tutor2u unemployment notes

Hope you enjoy! Hope you're enjoying revision and exams......

If you need some relief, watch this video:

http://uk.news.yahoo.com/diet-coke-and-mentos-stunt-goes-wrong.html

No 201: Slight fall in unemployment (of one type)

UK unemployment (labour force survey measure) has fallen by 36,000 to 2,46 million.

 
  This is over the 1st quarter of 2011. The percentage rate of unemployment is now 7.7%, down from the previous figure of 7.8%.

However, the rate of unemployment among 16-24 year olds is still very high - 20%.

Also, there was a rise in the Claimant count by 12,400 in April up to 1.47 million. This is explained by a movement of people from economically inactive categories such as those on sickness benefit and income support, on to unemployment benefit.

No 200!!!!!!!!!!!!!!!!!!! Oh dear, inflation

CPI inflation rose to 4.5% in April, compared to 4% in March. This was a surprisingly big increase.

(Note: this means prices were 4.5% higher in April 2011 compared to April 2010.)

The rise is blamed on increasing transport costs and rising prices for alcohol and tobacco. In his letter of explanation for the continued failure of inflation to meet the Bank of England target, Mervyn King said it was also due to the "increase in VAT to 20% in January, higher energy prices and increases in import prices".

On the other hand, RPI inflation fell a little from 5.3% to 5.2%, indicating some weakness in the housing market.

Read more about it here: http://www.bbc.co.uk/news/business-13421614

No 199: Useful revision presentations from Tutor2u

HERE are links to the Tutor2u revision presentations.

First, this link will take you to AS Micro (Module 1):

http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-revision-resources-collated/

Second, this link will take you to AS Macro (Module 2):

http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-revision-resources-collated/

No 198: Are you the 10,00th?

WE are very near to having the 10,000th visitor.

If you are the 10,000th, contact me or or the blog with some evidence of this - like a screenshot - and I'll organise some kind of prize!

No 197: ESSENTIAL Presentation about the UK Economy

  THIS links to a tutor2u presentation about the current UK economic situation:



http://www.tutor2u.net/economics/presentations/ukeconomymay2011/player.html

This presentation has 75 slides (!) but don't be scared - it really is all worth looking through.

No 195: Unemployment in Selected Countries 2005-2011

No 194: Spot of Economics' Economics News

EXCITING news! At great expense, Spot of Economics has started a TV news station......

GoAnimate.com: Economics news 1st march by spottygao

Like it? Create your own at GoAnimate.com. It's free and fun!


Deadly Tsunami Stops Japanese Economy
http://www.guardian.co.uk/world/2011/mar/13/japan-economy-recession-earthquake-tsunami

Report Argues for Big Changes in Public Sector Pensions
http://www.telegraph.co.uk/comment/columnists/alasdair-palmer/8378195/The-pensions-gravy-train-in-the-public-sector-has-to-be-derailed.html

European Union Holds Crisis Meeting Over National Debt
http://www.bbc.co.uk/news/business-12711183

Mervyn King Makes Attack on Banks
http://www.qfinance.com/blogs/ian-fraser/2011/03/07/boe-govenor-mervyn-king-and-the-case-for-reforming-britains-banks

Chinese Inflation Increases Again
http://www.telegraph.co.uk/finance/economics/8375605/Chinas-inflation-rises-to-4.9pc-in-February.html

World Has Most Billionaires Ever, According to New Report
http://www.forbes.com/wealth/billionaires
http://blogs.forbes.com/luisakroll/2011/03/09/the-worlds-billionaires-2011-inside-the-list/