Mervyn King on Tailwinds and Headwinds

Mervyn King delivers the latest Inflation Report from the Bank of England and focuses on the strength of two forces:

1/ The tailwind of the policy stimulus from monetary and fiscal policy
2/ The headwind of the continued deleveraging in the financial system

It is a good analogy to use and one that students should be able to latch onto as they grapple with their macroeconomics.

This BBC news video provides a good overview of the Bank’s current thinking.  In it the Governor explains why the Bank will - for the third time - expects to write to the Chancellor to explain an inflation overshoot. And he comes out with a good quote “Monetary policy can do little to affect short-term changes in inflation” ....... instead it has more leverage on the growth of total spending in the economy which (relative to the supply-side capacity of the economy) affects demand-pull inflationary pressures during the economic cycle.

Martin Wolf on Global Shocks [10 Feb 2012]
Russia’s monopoly power over gas supplies [5 Feb 2012]
Unit 2 Macro: Signs of Progress for Zimbabwe [29 Jan 2012]
Unit 2 Macro: Focus on China - Inflation [26 Jan 2012]
Unit 2 Macro: Focus on China - Per Capita Incomes [26 Jan 2012]
Unit 4 Macro: Focus on India - Supply Side Issues [25 Jan 2012]
Inflation - what’s up, what’s down and what’s going to happen next [17 Jan 2012]
Unit 3 Micro: World’s Largest Solar Plant Opens [15 Jan 2012]
Beyond the Bike - The Importance of Remittances [15 Jan 2012]
Unit 4 Macro: Economics of Fiscal Deficit Reduction [12 Jan 2012]
Unit 4 Macro: UK Bond Yields Reach Record Lows [11 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
Hopes and Fears 2012 [10 Jan 2012]
Unit 2 Macro: Quantitative Easing in the UK [8 Jan 2012]
Unit 4 Macro: Natural Disasters and their Economic Impact [7 Jan 2012]
Unit 2 Macro: Revision Quiz on Monetary Policy [6 Jan 2012]
Unit 1 Micro: Biomass Subsidies and Timber Prices [30 Dec 2011]
Unit 2 Macro: The UK Housing Market in 2011 [26 Dec 2011]
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry [21 Dec 2011]
Unit 3 Micro: Oligopoly and Duopoly in Bus Markets [20 Dec 2011]
Unit 2 Macro: Mobile Phones and African Economic Growth [18 Dec 2011]
Rising prices and falling real incomes [13 Dec 2011]
Unit 4 Macro: India - the Road Ahead [7 Dec 2011]
Unit 1 Micro: Inside a Biscuit Factory [1 Dec 2011]
Unit 3 Micro: Brand Loyalty in Mobile Phones [27 Nov 2011]
Beyond the Bike - The Value of Money [19 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Eurozone crisis - a selection of resources [12 Nov 2011]
Unit 3 Micro: Unilever hit by rising costs [6 Nov 2011]
Unit 3 Micro: Time of Use Pricing for Energy [2 Nov 2011]
Australia lowers interest rate to 4.5% [1 Nov 2011]
Unit 3 Micro: Economies of Scale and the Kinect [31 Oct 2011]
Unit 4 Macro: Should TNCs make full disclosure on factory wages? [30 Oct 2011]
Unit 3 Micro: UK Executive Pay - All in it Together? [29 Oct 2011]
Unit 1 Micro: Is the Sun Dipping on Solar Subsidies? [27 Oct 2011]
Unit 1 Micro: University fees and elasticity of demand [24 Oct 2011]
Unit 2 Macro: Economic Importance of Investment [19 Oct 2011]
Unit 2 Macro: Positive and Negative Multiplier Effects [14 Oct 2011]
Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
Unit 2 Macro: Can Exports Drive a Recovery? [13 Oct 2011]
Unit 4 Macro: Unit Labour Costs and Inflation [12 Oct 2011]
Unit 2 Macro: UK suffers a weak recovery [12 Oct 2011]
Unit 4 Macro: UK Inflation Charts [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
University Challenged [11 Oct 2011]
Unit 2 Macro: Homework Assignment on Consumer Spending [3 Oct 2011]
Unit 1 Micro: Homework Assignment on Market Prices [2 Oct 2011]
Unit 1 Micro: The Supply and Demand Rap! [28 Sep 2011]
Unit 1 Micro: Exercise on Equilibrium Market Prices [27 Sep 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Unit 1 Micro: Exercise on Market Demand [25 Sep 2011]
Greek debt decision tree [25 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Unit 3 Micro: Fixed and Variable Costs [18 Sep 2011]
Inflation in India [18 Sep 2011]
Unit 2 Macro: Interest Rates and Income Inequality [16 Sep 2011]
Study Note - Macroeconomic policy objectives [16 Sep 2011]
NHS spending good, private provision bad? [5 Sep 2011]
Mixing with the Nobel Economists [4 Sep 2011]
Unit 4 Macro: Baltic Dry Index and Global Weakening [19 Aug 2011]
Unit 1 Micro: The Price of Football [2 Aug 2011]
Monetary Policy Roundtable [25 Jul 2011]
Unit 1 Micro: Cotton Prices and the Retail Price of Clothing [13 Jul 2011]
Unit 1 Micro: Economics of Volatile Corn Prices [12 Jul 2011]
Unit 3 Micro: Motorsport Valley and External Economies of Scale [12 Jul 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
Unit 2 Macro: Reducing Unemployment after a Recession [11 Jul 2011]
Unit 3 Micro: Oligopsony - Dairy Losses Drive Farmers from the Fields [10 Jul 2011]
Unit 1 Micro: FirstBuy, Affordability and Effective Demand in Property [10 Jul 2011]
Unit 1 Micro: High price of petrol drains demand [9 Jul 2011]
A2 Macro: Consumer Spending [30 May 2011]
Lady Gaga and Baby Food! [29 May 2011]
Macro Revision: Putting Things in Context [25 May 2011]
AS Macro Key Term: Supply-Side Policies [25 May 2011]
AQA Macro: Remember to revise inflation [25 May 2011]
AS Macro Key Term: Demand Pull Inflation [24 May 2011]
AS Macro Key Term: Deflation [24 May 2011]
AS Macro Key Term: Cost Push Inflation [24 May 2011]
AS Macro Key Term: Inflation [24 May 2011]
AS Macro Key Term: Economic Recovery [23 May 2011]
AS Macro Key Term: Recession [23 May 2011]
AS Macro Key Term: Spare Capacity [23 May 2011]
AS Macro Key Term: The Output Gap [23 May 2011]
Revision notes on unemployment [22 May 2011]
A2 Micro: Oligopoly and Collusion [20 May 2011]
A2 Micro: Oligopoly [20 May 2011]
A2 Micro: The Importance of Profit [19 May 2011]
A2 Micro: High and Low Marginal Cost Products [19 May 2011]
A2 Micro: Examples of Price Discrimination [19 May 2011]
A2 Micro: Perfect Competition [19 May 2011]
A2 Micro: Competition and Efficiency [19 May 2011]
A2 Micro: Business Growth [18 May 2011]
A2 Micro: Innovation and Economic Policies [18 May 2011]
A2 Micro: Innovation Efficiency and Welfare [18 May 2011]
A2 Micro: Moving Away from Profit Max [18 May 2011]
Unit 3 Micro: Diseconomies of Scale [18 May 2011]
A2 Micro: Minimum Efficient Scale [18 May 2011]
AS economics: Using the cost-benefit principle [18 May 2011]
The economics of price gouging after a natural disaster. [16 May 2011]

ECONOMICS TEACHER RESOURCE NEWSLETTER

Join over 6,000 other Economics Teachers in the UK and around the world who receive the tutor2u regular Economics Resource Email Newsletter. Get special offers, first news of latest resources, teaching ideas, conferences and workshops + loads of great ideas for teaching economics from our blog authors.