Everything is crystal clear with hindsight
Are government bonds risky? This question arose a year ago, during a meeting with my bank. I wanted a low risk portfolio, but they noted that I did not want to hold UK government bonds. Whether it was the regulator who was insisting, or whether it was the way the bank was interpreting some Delphic […]
Our economic recovery is real, but what we can still learn from the US?
Some people are never satisfied. The evidence is mounting that the UK economy is now on the path to recovery. But to those who denied the possibility of any economic revival at all under the policies of “austerity”, this is simply not good enough. It is the wrong kind of recovery, they say. Fuelled by […]
Recovery and summer are in the air, but doom mongers still lurk
The GDP growth figures announced last week for the second quarter of this year have sent most people away on their holidays in a cheerier mood than last year. The recent weather has certainly helped. But gloomy clouds may hover over the exclusive settings of Tuscan villas and beach houses in Martha’s Vineyard, where bien pensant commentators […]
No free lunch. Defaults today mean less jam tomorrow
Potential defaults in the Euro zone have been in the news again. In Portugal, the ruling coalition parties and the main opposition Socialists have been unable to agree on a European Union-led bailout plan after days of talks. Yields on the country’s 10 year bonds have approached 7 per cent, compared to the 1.5 per cent in […]
Ignore Krugman: We’re not caught in another depression
Spotting and identifying new species is always exciting. And the last couple of years has seen the emergence of a new type of economic commentator, the recovery denier. Paul Krugman, the Nobel prize-winning economist, wrote a piece at the end of last year in which he compared the current situation to that of the 1930s. On […]
There are errors and errors. Does the Reinhardt and Rogoff miscalculation mean that Osborne should change tack?
The distinguished American academic economists, Carmen Reinhardt and Ken Rogoff, have been very much in the news. Their 2009 book, This Time is Different, was a comprehensive examination of financial crises over the past 800 years. The work received many plaudits and awards. They suggested that when the ratio of public debt to GDP in […]
Sovereign debt and Euro zone reality
The recent debacle in Cyprus has essentially been shrugged off by the markets. The European Central Bank vigorously asserts the crisis in the Euro zone is over. So why is there continued unease about the financial viability of countries such as Spain and Portugal, a morass into which even the French are now being dragged? […]
Why Can’t Debt Just be Inflated Away?
The debt problems which the UK and Europe currently face are essentially ones of political economy. Basically, there is a lot of debt around and the simple question is: who is going to pay for it? All the economic theory in the world does not get around this fundamental issue. Traditionally, bondholders paid. The real […]
cutting the deficit
The new Government’s plans to reduce the deficit much more sharply than most people expected. Will this stimulate or depress the economy? Not surprisingly there is a fierce debate about this. But it is a situation in which econometric evidence is not going to be of much use at all in arbitrating the dispute. So […]
