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Why Are Bond Yields Not Higher?

posted to Economics Essays on Tue 7th Sep 10

Typically, economists will teach - if Government borrowing rises, if there is a rise in debt to GDP ratios, then we would expect interest rates on government bonds to rise.The logic is that:To attract more investors to buy government debt, we need to raise
IMF and UK Deficit

posted to Economics Essays on Thu 2nd Sep 10

I have just returned from a two week holiday in New York, US. Before the start of term, I took advantage to have a short break from economics. On returning, I see the same issues dominating the headlines.The IMF have produced a report on UK debt. On the one
The Religion of Tax Cuts

posted to Economics Essays on Wed 18th Aug 10

Readers Comment: I don't care if every street light stays off, I don't care if public employee rolls get cut in half, I don't care if unemployment goes to 15 percent. Not a penny more in higher taxes. (from: NY Times article America Goes dark)America is one

Two Speed European Economy

posted to Economics Essays on Mon 16th Aug 10

The idea of a two speed Europe is nothing new. Roughly the strong dynamic north(Germany in particular), the weaker more sluggish south (Italy, Spain, Portugal, Greece) . At one point it was often used to refer to those who had joined the Euro and those who
Limitations of Zero Interest Rates

posted to Economics Essays on Wed 28th Jul 10

In recent weeks, I have frequently been repeating the mantra if you tighten fiscal policy, you need loose monetary policy. i.e. If the government raises taxes and cut spending, we need low interest rates to maintain growth of aggregate demand and economic growth.
How Long Will Interest Rates stay at Zero?

posted to Economics Essays on Mon 26th Jul 10

Already, one member of the MPC, Mr Sentance, has voted for an increase in interest rates. Mr Sentance argued for a rise in rates from 0.5% to 0.75%. His logic is that inflation is in danger of becoming normalised at above target. Also, if rates are left too

Financial Expectations

posted to Economics Blog on Mon 16th Aug 10

Source: Bank of England inflation report August 2010A while back the Jean Claude Trichet of the ECB said austerity measures should help improve economic confidenceThe idea that austerity measures could trigger stagnation is incorrect,… confidence-inspiring
Inflation and the Recession

posted to Economics Blog on Sat 31st Jul 10

In a recession, you would expect a fall in the inflation rate. In basic macroeconomics, we would teach. If AD falls (or increases at a slower rate than AS), then the economy will experience spare capacity. If there is spare capacity in the economy, firms will
Outlook for Monetary Policy

posted to Economics Blog on Thu 29th Jul 10

There is speculation about how long interest rates will stay at zero. – See: – How long will interest rates stay at zero?Another issue is the limitations of zero interest rates. There is much hope / expectations that fiscal austerity can be offset