No more whingeing, please. The recovery is solid.
Last month saw some very positive economic news. The US Federal Reserve raised interest rates for the first time in over seven years. The Bank of England reported on the major stress test of UK banks which it launched in March 2015. It concluded that “the banking system is capitalised to support the real economy […]
It is not just the Euro. Southern Europe faces a major structural crisis
Major shocks to social and economic systems ruthlessly expose weaknesses which can be contained in more normal times. When the price of oil quadrupled in 1973/74, the different levels of resilience in the labour markets of Western Europe were quickly revealed. Inflation initially rose sharply everywhere. By 1976, it had fallen to 4 per cent […]
Integration won’t save the struggling Eurozone
Olivier Blanchard, the recently retired Head of Economics at the International Monetary Fund, has something of a track record with his predictions. In 2013, he warned George Osborne that he was “playing with fire” with the UK’s recovery from the financial crisis. Austerity had to be relaxed. We now know that we were actually nowhere […]
Guaranteed bank deposits and the market for lemons
One aspect of the Greek crisis which will affect many readers is the reduction in the amount of cash in a bank deposit which is protected. The Bank of England announced that the current guaranteed amount of £85,000 will be cut to £75,000 on 1 January. This has led to predictable outrage, with Andrew Tyrie […]
Open borders or fair wages: the left needs to make up its mind
As published in the Guardian on Tuesday 24th March 2015 as part of their ‘Economics – Immigration Special’ Mass immigration increases inequality. This is the unpalatable fact the liberal left in Britain refuses to accept. Markets are imperfect instruments. But it is not necessary to subscribe to free market economic theory to believe that large […]
Will the internet lower long-term growth – or do we need to embrace change?
Are we doomed to secular stagnation, to permanently lower rates of economic growth? The debate was sparked off nearly a decade before the financial crisis by the top US economist Robert J Gordon. He took a pessimistic view of the impact of the new wave of technology on productivity and economic growth. The latest contribution […]
Can Game Theory Help the Greeks?
Game theory is a big topic in academic economics. It is scarcely possible to graduate from a good university without exposure to its abstruse logic. So perhaps the Greek government, replete with economists, is using game theory to plan its tactics. Or is Chancellor Merkel herself being briefed with calculations carried out deep in a […]
All we are saying: give capitalism a chance
Is there a secret Leninist cell operating at a high level in the European Commission’s headquarters in Brussels? One which is dedicated to the overthrow of the capitalist structures of the European Union? The evidence from this past week is certainly consistent with this hypothesis. The demand for an additional £1.7 billion payment from the […]
Low or zero inflation is normal: competition keeps it that way
Fears of deflation are rising across Europe. Inflation keeps edging down to lower and lower rates. Eurostat estimates the rate of inflation in the Euro zone in the year to August to be only 0.4 per cent, compared to 1.3 per cent in the year to August 2013. Negative rates were observed in seven EU […]
Two cheers for the global recovery, but doubts remain in the Euro zone
Worries are growing about some of the countries in the Euro zone slipping back into double dip recession. By convention, a recession is when national output (GDP) has fallen for two successive quarters. But this is far from being news. In a substantial number of economies, output is lower than it was not just two […]
A Different View of World Trade: Why National Accounts Can Be Exciting
Imagine that, for some reason, you were forced to choose between having to read a long, turgid novel like Westward Ho or Middlemarch, or a book on the methodology of the national economic accounts. Most people, however reluctantly, would plump for the former. But the latter can at times be very exciting. A recent paper uses national accounts […]
Supply-side growth, not inflation, is the cure to the debt overhang problem
In the year to March 2014, consumer prices in Sweden fell by 0.4 per cent. This has prompted the central bank, the Riksbank, to abandon the normally cautious language used by such institutions. Over the same period, inflation was negative in a further seven European countries, such as Greece, Portugal and Spain. In eight other […]
Frangleterre… Labour Mobility undermines Tax and Spend regimes
Pimlico Plumbers will be a familiar brand to many readers – it has a prominent advert on the approach into Waterloo station. But the company is now calling for plumbers who are fluent in both English and French, and says applicants will be interviewed by a native French speaker. This is just the tip of […]
Forward guidance needed for companies, not consumers
Most of the commentary on the UK’s economic recovery focuses on consumers. Are they taking on too much debt again to finance their spending? Is there a bubble in house prices, as people get excited about bricks and mortar again? Certainly, in terms of its sheer size, spending by consumers is by far the biggest […]
German revival exposes deep fissure within Europe’s economies
In the 1990s and early 2000s, Germany was seen by many as the new ‘Sick Man of Europe’. Between 1991 and 2005, GDP growth averaged only 1.2 per cent a year, compared to 3.3 per cent in the UK. Since then, the German economy has revived dramatically. The recovery in the German cluster of economies […]
