Thank competition – not magical central bankers – for years of low inflation
Tempers are fraying at the highest levels of economic policy-making in the UK. Theresa May, at the Conservative Party conference, emphasised the “bad side effects” for savers of the Bank of England’s policy of near-zero interest rates, a position reinforced by former Tory leader William Hague in the Telegraph this week. A few days ago, […]
Why the economic picture tends to be rosier than initial estimates suggest
One of the surprises of last week was the Office for National Statistics (ONS) estimate of economic growth in the second quarter of 2016, the period from April to the end of June. In the run up to Brexit, the economy expanded by 0.6 per cent on the first quarter of the year. This was […]
The only way could be down for shares – and Brexit is just the catalyst
The Brexit vote creates many uncertainties, exciting or frightening depending on your predilection. One thing which is certain is that the Leave victory was delivered by the less-skilled sections of the electorate. It seems part of a more general stirring up of what we might think of as the dispossessed, those who feel left behind […]
The poor state of macro justifies scepticism with Brexit disaster forecasts
David Cameron has tried to frame the Brexit debate into one based on economics. Standing with him is the overwhelming consensus of economists themselves, from academics to the International Monetary Fund (IMF). Their pronouncements are not having that much impact on the electorate if the polls are to be believed. There is justification for this […]
The IMF is in trouble – and not just due to its poor forecasts
The International Monetary Fund (IMF) has played a prominent role in world financial affairs in the post-Second World War period. In the 1950s and 1960s, its main purpose was to support the system of fixed exchange rates. Since then its activities have evolved to embrace developing economies and both banking and sovereign debt crises. The […]
China is drowning in private sector debt: there’s no telling how this one will end
The eyes of the financial and economics worlds are now fixed on China, with focus predominantly on Chinese stock markets and the country’s GDP figures. A fascinating perspective was provided last week in the leafy borough of Kingston upon Thames. The university has recruited the Australian Steve Keen as head of its economics department, and it […]
Supply side success is a cure for the drug of deficit finance
George Osborne’s plan to run financial surpluses and use them to pay off government debt has been met with the usual set of whinges and whines, mainly from academic economists funded by the taxpayer. Of course, their arguments are based purely on what they believe to be the intellectual merits of their case. One of […]
Day care for dogs and the output gap
I am keen on dogs. Recently, I have seen an advert for a special canine toothbrush designed to get rid of the pet’s bad breath, surely a difficult challenge given what dogs get up to. Vans promoting home beauty visits for dogs have proliferated for some time now. A new service being promoted is day […]
Bribing the electorate: new rules of the game thanks to zero inflation
The temptation to believe in the concept of a free lunch is one which has proved irresistible to numerous governments through the ages. Henry VIII, for example, has seized popular imagination once again through the brilliant portrayal of him by Damian Lewis in Wolf Hall. Bluff King Hal is the nickname often associated with the […]
Why is inflation so low?
Zero inflation is trending. The consumer price index in the UK was at the same level in February as it was a year earlier. The reporting of this figure on the BBC website created some unintended amusement, however. The drop to zero, we were told, was “sharper than many analysts had expected”. And what was […]
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 […]
The so-called ‘output gap’: another piece of economic mumbo-jumbo
The concept of the’ output gap’ is central to mainstream macroeconomics. It is not merely of academic interest. The Office for Budget Responsibility (OBR) has a specific requirement to estimate the output gap, which it defines formally as “the difference between the current level of activity in the economy and the potential level it could […]
How Bad Has It Been? 2008-2013 in Historical Perspective
The end of a year is a good time to take stock. For the first time since 2007, prospects for the UK for the forthcoming year look unequivocally good. But looking back, just how bad have the last few years been across the developed world as a whole? And how do they compare with previous […]
How sticky is unemployment? Will it take three years to fall?
The views expressed by the new Bank of England Governor, Mark Carney, on interest rates and unemployment remain a hot topic. Interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years. The perception which many people have of unemployment is indeed that it is rather […]
No interest rate changes for three years? Zero hours contracts for the Monetary Policy Committee!
The new Governor of the Bank of England, Mark Carney, said last week that interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years. The battle of Austerlitz in 1805 was one of Napoleon’s greatest victories, leading to his complete domination of Continental Europe. […]
