http://www.tutor2u.net/blog/index.php/economics/ en tutor2u.net Copyright 2012 2012-02-11T19:04:45+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-impact-of-interest-rates http://www.tutor2u.net/blog/index.php/economics/comments/the-impact-of-interest-rates#When:06:31:19Z The US economy may have grown at nearly 3% in the last quarter of 2011, but the Federal Reserve announced last week that they do not expect to raise interest rates until the end of 2014. It has cut its growth forecast for 2012 from 2.5-2.9%, to 2-2.7%, and says that the economy faced “significant downside risks” and that it “expects to maintain a highly accommodative stance for monetary policy” - which I take to mean expansionary. This article about that interest rate decision is useful for economics teachers and students as it highlights a couple of results of that announcement; firstly that the dollar’s exchange rate immediately lost value as the interest rate made the US a less attractive place to keep cash, and secondly that government benefited as the cost of its borrowing in markets for 10 years fell from 2.06% to 1.94%, as traders priced in the lower medium-term interest rate expectations. A2 Macro, AS Macro, Macroeconomic Policies, Monetary Policy, OECD Economies, US Economy, Teaching of Economics, 2012-01-29T06:31:19+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-a-jobs-boost-for-the-us-economy http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-a-jobs-boost-for-the-us-economy#When:09:34:27Z Could 2012 provide stronger news for the US economy and offer President Obama a decisive electoral dividend in the run up to the November Presidential Election? The recent jobs data in the USA looks more promising for hopes of a significant pick-up in growth and employment all of which will help attempts to control the fiscal deficit. This news report from AlJazeera looks at the latest US unemployment figures. Falling unemployment provides a platform for rising aggregate demand and stronger short term economic growth. And stronger economic activity in the world’s biggest economy is good news for the UK too! AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Cycles and Shocks, OECD Economies, US Economy, Unemployment, 2012-01-08T09:34:27+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-exchange-rate-economics-where-next-for-the-us-dollar http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-exchange-rate-economics-where-next-for-the-us-dollar#When:14:09:21Z Is the US dollar going to be knocked off its perch as the only true global currency? Professor Barry Eichengreen, the author of Exhorbitant Privelege argues that there are strong reasons to believe that the US dollars’ position in the world financial system will decline in the years ahead. The US dollar has been for many years the world’s most powerful currencies but this power seems to be waning as other currencies rise in significance and the US economy struggles to recover from their financial and economic crisis and the fiscal challenge. Eichengreen argues that there will be three truly global currencies going forward - the dollar, the Euro and the remnimbi. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Exchange Rates, Financial Markets, Global Economy, Macroeconomic Policies, OECD Economies, US Economy, Teaching of Economics, 2011-12-31T14:09:21+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/2011-in-review-the-us-economy http://www.tutor2u.net/blog/index.php/economics/comments/2011-in-review-the-us-economy#When:15:29:45Z 2011 for the US economy was a year of slow growth and fears of a double-dip recession, but there were some more positive signs as 2011 came to a close. Can the world’s biggest economy sustain a more durable upturn in activity during 2012? Keep in mind that this coming year will be dominated by the lead-in to the November Presidential election. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, OECD Economies, US Economy, 2011-12-27T15:29:45+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-americas-hour-glass-economy http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-americas-hour-glass-economy#When:20:31:58Z Here is a revealing three minute video on the challenges facing America’s declining middle class. Falling real incomes, rising living costs, deep structural unemployment problems - moving on up has got harder to do - what are the social effects of this across so many states? AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, OECD Economies, US Economy, Poverty and Inequality, Standard of Living, Teaching of Economics, 2011-11-09T20:31:58+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tour-of-the-us-income-distribution-the-l-curve http://www.tutor2u.net/blog/index.php/economics/comments/tour-of-the-us-income-distribution-the-l-curve#When:07:52:08Z Everyone knows about the Lorenz Curve but with the OWS events of late I came across the ‘L Curve”. The red line represents a graph of family income across the population. The height of the curve at any point is the height of a stack of $100 bills equalling that income. On the scale of the football field graph shown here the bottom 99% of the population measure their incomes in inches.  The top 1% measure their incomes as stacks of $100 bills feet or even miles high!  The total wealth of the few people in the vertical spike equals the total wealth of the rest of the population combined. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, OCR A2 Economics Unit F585, A2 Micro, AS Micro, Emerging Economies, OECD Economies, US Economy, Poverty and Inequality, Standard of Living, Teaching of Economics, 2011-10-25T07:52:08+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/who-has-become-the-first-major-company-to-back-the-occupy-wall-street-prote http://www.tutor2u.net/blog/index.php/economics/comments/who-has-become-the-first-major-company-to-back-the-occupy-wall-street-prote#When:20:28:13Z This will be today’s starter question for my Economics classes- and it’s an interesting one, as whilst this company expounds the ideals of independence and freedom it’s actually owned by one of the world’s largest consumer companies- who swiftly distanced themselves from the announcement OECD Economies, US Economy, Quirky Trivia, 2011-10-12T20:28:13+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/currency-manipulator http://www.tutor2u.net/blog/index.php/economics/comments/currency-manipulator#When:15:31:13Z The U.S came closer to finally calling the Chinese a currency manipulator and retaliating in the new round of protectionism fears. A good summary of the key issues here. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, Emerging Economies, China Economy, Exchange Rates, Global Economy, Macroeconomic Policies, Monetary Policy, Trade Policies, OECD Economies, US Economy, 2011-10-04T15:31:13+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-at-the-movies-too-big-to-fail http://www.tutor2u.net/blog/index.php/economics/comments/economics-at-the-movies-too-big-to-fail#When:05:28:01Z A big thank you to my former student Mike Dawes, who recommends the film of the book ‘Too Big to Fail’. The made-for-TV film has recently been shown on Sky Anytime, where you may have caught it, but if not there are some trailers and extracts available here on HBO’s website, as well as a synopsis. Mike has also found a YouTube extract of a scene in the movie where US Treasury officials (Hank Paulson, Neel Kashkari, Jim Wilkinson) are deciding how to break the news of the AIG bailout in a press release and, in his words “there is a Scooby-Doo style unravelling of the recession which for 2 minutes is possibly one of the best explanations I have heard. They also neatly explain Credit-Default Swaps which is equally simple and may help those who were struggling to understand it.” Andrew Ross Sorkin’s book which led to the film is available from Amazon’s US store here. Global Economy, Credit Crunch, OECD Economies, US Economy, Teaching of Economics, Economics at the Movies, 2011-09-29T05:28:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/apple-is-richer-than-the-us-government http://www.tutor2u.net/blog/index.php/economics/comments/apple-is-richer-than-the-us-government#When:12:01:00Z Yes- it’s true! Read on to find out more about this incredible statistic. Macroeconomic Policies, Fiscal Policy, OECD Economies, US Economy, 2011-07-30T12:01:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/what-might-happen-on-august-2nd http://www.tutor2u.net/blog/index.php/economics/comments/what-might-happen-on-august-2nd#When:22:06:00Z Well- it’s the day the United States might go bankrupt! Read on to find out more and for links to some useful resources to aid a class discussion of this fascinating topic. AS and A2 Specifications, EdExcel Economics Unit 2, Global Economy, Credit Crunch, Macroeconomic Policies, Fiscal Policy, OECD Economies, US Economy, 2011-07-12T22:06:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tracking-the-effects-of-the-recession-on-gdp http://www.tutor2u.net/blog/index.php/economics/comments/tracking-the-effects-of-the-recession-on-gdp#When:11:59:01Z An excellent resource for Unit 2 and Unit 4 macroeconomics. Vishnu Padmanabhan from Timetric has this excellent look at the impact of the recession on real GDP growth in OECD countries. Which countries did best and worst in the recession? It turns out that Australia, Poland, Israel and South Korea were the countries least affected by the crisis and all avoided a full-blown recession - experiencing instead a soft landing. Here is Vishnu’s article. Our own growing selection of Timetric charts can be found by scrolling down to the bottom of this blog entry. The OECD has just produced their annual review of Going for Growth - a largely supply-side look at policies designed to promote long-term growth in productive potential in the world economy. Details can be found here. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Cycles and Shocks, Economic Growth, European Economy, The Euro, Global Economy, Credit Crunch, OECD Economies, French Economy, German Economy, Greece Economy, Ireland Economy, Japan Economy, Spain Economy, US Economy, Teaching of Economics, UK Economy, 2011-04-05T11:59:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/timetric-unemployment-in-the-us-economy http://www.tutor2u.net/blog/index.php/economics/comments/timetric-unemployment-in-the-us-economy#When:18:12:00Z One of the most keenly awaited macro statistics in the USA is the monthly data on employment and unemployment. For some time there have been fears that the huge fiscal and monetary policy stimulus programs seem to have been having little effect on the jobless rate. As we can see from the charts below there are tentative signs that a more durable economic recovery is setting across the Atlantic. The unemployment rate has fallen to a two year low, employment in private sector businesses is expanding and the steep fall in manufacturing employment seems to have come to an end (for now). Getting unemployment down is crucial for Obama with the next Presidential electoral campaign in view. And it is also important for the wider health of the world’s biggest economy. One of the really striking things about the recent recession and weak recovery has been the dramatic increase in the mean duration of unemployment in the USA compared to previous bouts of cyclical unemployment. My third chart in this blog looks compelling and suggests that it has been really hard for those who have lost their jobs in the wake of the global financial crisis and the subsequent recession to find fresh work. Long-term unemployment is a structural problem in the labour market and it becomes harder to resolve as the length of time spent out of paid work grows month by month.   AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Macroeconomic Policies, OECD Economies, US Economy, Unemployment, 2011-04-01T18:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/house-price-rollercoaster http://www.tutor2u.net/blog/index.php/economics/comments/house-price-rollercoaster#When:18:21:00Z This is a terrific visualisation of what has happened to US house prices since the late nineteenth century - we ride the rollercoaster based on data from the Case Shiller index. And if you want the latest Case Shiller data on US house prices - based on the 20 city survey, then click on the Timetric charts below .... hold onto your hats, the Florida property price data in particular looks pretty scary AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, Housing Economics, OECD Economies, US Economy, Teaching of Economics, Digital Learning, 2011-03-13T18:21:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/timetric-unemployment-rates-for-selected-countries http://www.tutor2u.net/blog/index.php/economics/comments/timetric-unemployment-rates-for-selected-countries#When:20:41:00Z In this Timetric chart blog we look at unemployment rates for a selection of country groups - these automatically updated charts will track what is happening to the standardised jobless rates for clusters of countries starting with one that includes the Euro Area, Germany, USA, UK and Japan. The second chart is the unemployment rates in the so-called PIIGS - Portugal, Italy, Ireland, Greece and Spain AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, European Economy, The Euro, OECD Economies, German Economy, Greece Economy, Ireland Economy, Japan Economy, Spain Economy, US Economy, Teaching of Economics, UK Economy, Unemployment, 2011-03-12T20:41:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/dambisa-moyo-how-the-west-was-lost http://www.tutor2u.net/blog/index.php/economics/comments/dambisa-moyo-how-the-west-was-lost#When:15:51:00Z Dambisa Moyo’s talk at the RSA available here focuses on some of the long term structural problems facing Western Economies in general and the USA in particular.  She argues that there are three crucial ingredients in economic growth - better capital, the quantity and quality of the workforce plus improvements in productivity   AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, China Economy, Cycles and Shocks, Global Economy, Macroeconomic Policies, Fiscal Policy, OECD Economies, US Economy, Teaching of Economics, 2011-03-11T15:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-virtuous-circle-of-recovery-paul-krugman http://www.tutor2u.net/blog/index.php/economics/comments/a-virtuous-circle-of-recovery-paul-krugman#When:09:44:00Z A hat tip to Larry Spence for flagging up this super piece from Paul Krugamn in the New York Times. His focus is on the dynamics of an economic recovery and the risks of fiscal austerity tipping the US back into recession. “As families have repaired their finances, they have increased their spending; as consumer demand has started to revive, businesses have become more willing to invest; and all this has led to an expanding economy, which further improves families’ financial situation…....... The clear and present danger to recovery, however, comes from politics — specifically, the demand from House Republicans that the government immediately slash spending on infant nutrition, disease control, clean water and more.” More here on How to Kill a Recovery AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Economic Growth, Macroeconomic Policies, Fiscal Policy, OECD Economies, US Economy, UK Economy, Recession Watch, 2011-03-06T09:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-us-china-trade-deficit http://www.tutor2u.net/blog/index.php/economics/comments/the-us-china-trade-deficit#When:10:45:00Z The US trade gap with China hit a record $273.1 billion in 2010 raising fresh fears of a deteriorating trade relationship between the world’s two biggest economies. But a quick look behind the figures suggests that the US economy is enjoying a surge in exports a major stimulus to their recovery hopes. The raw data is that US goods exported to China totaled $91.9 billion in 2010 while imports from China rose 24 percent to $364.9 billion. In fact that represents a rise in the value of US-China exports in 2010 of more than 31%. And the true scale of the trade imbalance with China is likely to be much smaller than the conventionally published data suggests. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Balance of Payments, Emerging Economies, China Economy, Global Economy, International Trade, OECD Economies, US Economy, 2011-02-14T10:45:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-gdp-compared-to-other-countries http://www.tutor2u.net/blog/index.php/economics/comments/us-gdp-compared-to-other-countries#When:09:38:01Z The Economist has a neat graphic looking at how American states compare with other countries in terms of GDP and population. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, Global Economy, OECD Economies, US Economy, Teaching of Economics, 2011-01-23T09:38:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-us-china-power-balance-trade-and-currencies http://www.tutor2u.net/blog/index.php/economics/comments/the-us-china-power-balance-trade-and-currencies#When:08:18:00Z The BBC produced a nice little graphic this week to go illustrate comparisons between the US and Chinese economies, alongside the talks between President Obama and President Hu Jintao. Relations between the two countries have been strained by issues such as the trade imbalance and China’s growing military might. The figures here give some background to those issues. A2 Macro, Balance of Payments, Emerging Economies, China Economy, Exchange Rates, Global Economy, International Trade, OECD Economies, US Economy, 2011-01-22T08:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/will-we-have-to-live-with-high-unemployment http://www.tutor2u.net/blog/index.php/economics/comments/will-we-have-to-live-with-high-unemployment#When:10:23:00Z Will many advanced economies have to live with a new semi-permanently higher level of unemployment as a consequence of the global financial crisis, economic slump and a period of fiscal austerity?   AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Global Economy, Credit Crunch, Macroeconomic Policies, Fiscal Policy, Monetary Policy, OECD Economies, US Economy, Unemployment, 2011-01-17T10:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fix-the-budget-us-style http://www.tutor2u.net/blog/index.php/economics/comments/fix-the-budget-us-style#When:12:15:00Z A hat tip to Shani Hartley for spotting this fantastic resource from the New York Times. Readers are invited to survey a large number of policy options that might either control fiscal spending or raise extra tax revenues. Checking the boxes you prefer feeds through to deficit reduction and fiscal packages can be shared online. Here is the link. Macroeconomic Policies, Fiscal Policy, OECD Economies, US Economy, Teaching of Economics, 2010-11-15T12:15:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-hip-hop-take-on-currency-wars http://www.tutor2u.net/blog/index.php/economics/comments/a-hip-hop-take-on-currency-wars#When:18:02:00Z A hat tip to Brian Rafferty for spotting this super hip hop take on the unspoken currency war between the United States and China. Check out the US-Sino Currency Battle! AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Emerging Economies, China Economy, Exchange Rates, OECD Economies, US Economy, Teaching of Economics, 2010-11-14T18:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/here-we-go-again-high-tariffs-and-currency-wars http://www.tutor2u.net/blog/index.php/economics/comments/here-we-go-again-high-tariffs-and-currency-wars#When:09:37:01Z In 1930 the Hawley-Smoot Tariff Act was passed by the Republican-controlled House of Representatives. It was an attempt (by increasing tariffs) to ease the effects of the Great Depression but in fact it made it worse. Recently the House of Representatives passed legislation aimed at imposing trade sanctions against China unless it allows its currency to appreciate, thus diminishing its export advantage. Furthermore Treasury Secretary Tim Geithner warned against currency policies that might intensify “short-term distortions in favour of exports.” A2 Macro, AS Macro, Global Economy, International Trade, Macroeconomic Policies, Monetary Policy, OECD Economies, US Economy, Teaching of Economics, 2010-10-09T09:37:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-macro-economic-growth-charts http://www.tutor2u.net/blog/index.php/economics/comments/a2-macro-economic-growth-charts#When:19:50:00Z We started our teaching this year by looking at issues related to measuring living standards and now we are moving onto aspects of the causes and consequences of economic growth. I like to put growth into some kind of context by drawing on recent UK cyclical data and growth information for a range of other countries. I have attached a brief powerpoint of such charts with this blog which may be of some use for colleagues. One of the interesting trends for many OECD countries is that estimated trend growth (the % change in potentail) GDP has fallen sharply in recent years. Indeed for Spain and Ireland, trend growth estimates have dropped into negative territory. Mo’s recent blog on hysteresis links in part to why this is happening. Download the A2 Macro Growth Charts Economic_Growth_Charts.pptx AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Emerging Economies, Cycles and Shocks, Economic Growth, OECD Economies, Ireland Economy, Japan Economy, Spain Economy, US Economy, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-09-21T19:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/hysteresis1 http://www.tutor2u.net/blog/index.php/economics/comments/hysteresis1#When:17:45:01Z The idea of hysteresis from the current recession is well illustrated in this article. Millions of Americans risk falling out of the job market forever, the Organisation for Economic Co-operation and Development said today, as it cautioned a full recovery will take years. This recession has left the US with a long-term unemployment rate - a measure of those without work for more than six months - of 4.5pc, almost double that seen in the downturns of the 1980s and 1990s… Read more here. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Supply, OECD Economies, US Economy, Unemployment, Credit Crunch, 2010-09-21T17:45:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-recession http://www.tutor2u.net/blog/index.php/economics/comments/us-recession#When:18:48:00Z The U.S. recession will probably be the longest since World War Two and could worsen without heavy government spending, according to a closely-watched survey of economists released on Saturday. Read more here… AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Global Economy, OECD Economies, US Economy, Recession Watch, 2010-09-20T18:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/currencies-in-the-news-two-videos http://www.tutor2u.net/blog/index.php/economics/comments/currencies-in-the-news-two-videos#When:10:08:00Z Movements in the external value of currencies have direct and indirect effects on plenty of macroeconomic variables such as inflation, exports, output, profits and - ultimately - jobs. This week we have seen the Japanese central bank intervening in the foreign exchange market in an attempt to drive the value of the Yen lower. Japan is struggling to sustain a recovery after the global financial crisis and a weaker currency is seen as a vital part of the attempt to prevent another draining bout of price deflation. And the long-running dispute between the United States and China about the alleged under-valuation of the Yuan against the US dollar continues to rumble. This BBC news video takes a swing through New Jersey to find trade unions lobbying government for more action on the exchange rate issue. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, China Economy, Cycles and Shocks, Exchange Rates, Global Economy, Credit Crunch, International Trade, Macroeconomic Policies, Monetary Policy, OECD Economies, Japan Economy, US Economy, Teaching of Economics, 2010-09-16T10:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/risks-of-double-dip-rise-over-the-pond http://www.tutor2u.net/blog/index.php/economics/comments/risks-of-double-dip-rise-over-the-pond#When:15:52:00Z There are some very worrying signs for the United States today with the news that new home sales (for completed properties and those under construction) have dropped to to their lowest level for nearly 50 years. Dr Doom, Noruiel Roubini has tweeted that the risk of a double dip recession in advanced economies (comprising the USA, Japan, the Eurozone and the UK) has now risen to 40%. The fall in new home sales is taken as a litmus test of weakening confidence and signs that the fiscal and monetary policy stimulus policies have started to run out of steam. Unemployment claims in the USA are up to 500K per month and a fresh descent into recession in the labouy-intensive US construction industry will give deeper deflationary pressure on the world’s largest economy. Since the start of the global financial crisis, US construction businesses have shed more than two million jobs. In a related feature, Nouriel Roubini takes tea with the Economist and discusses some of the main systemic risks for the global economy. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, OECD Economies, US Economy, Recession Watch, Credit Crunch, 2010-08-25T15:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/inequality-and-the-risk-of-financial-crisis http://www.tutor2u.net/blog/index.php/economics/comments/inequality-and-the-risk-of-financial-crisis#When:08:38:00Z Are there causal links between the scale of income and wealth inequality and the risks of financial crisis and distress? This article from the New York Times reports on research from David A Moss at the Harvard Business School who continues to mine cross country data on inequalities to see if there are close correlations with banking crises in particular countries. Might it be the case that persistent relative poverty among lower income groups was a factor driving the expansion of sub-prime lending and excessive borrowing on very expensive credit cards? Or was the sub-prime debacle largely the result of inappropriate financial deregulation and policy interest rates being held close to zero for too long rather than a trend rise in inequality? What of the incentives of people at the top of the income scale? Has the rising economic power and influence of the super rich played some role in creating the conditions for financial and macroeconomic instability. Correlation does not necessarily imply causation as the article makes clear in an interview with Glenn Hubbard from the Columbia Business School. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Cycles and Shocks, Global Economy, Credit Crunch, OECD Economies, US Economy, Poverty and Inequality, Teaching of Economics, 2010-08-25T08:38:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/paul-krugman-at-the-lse http://www.tutor2u.net/blog/index.php/economics/comments/paul-krugman-at-the-lse#When:21:42:00Z This is a reprise of a blog posted last summer following Krugman’s talk at the LSE. So much of what he talked about remains relevant today especially the challenges facing macro-economic policy-makers when deflationary and debt dangers continue to lurk. ”“The central problem of depression-prevention has been solved, for all practical purposes.” Robert Lucas, 2003 In a world of depression economics many of the standard rules of economics no longer apply. The global economy remains in the grip of a sustained downturn, the duration of which might make Japan’s “lost decade” look favourable in comparison. And macro policy-makers are grappling with an infection that has proved highly resistant to the usual doses of anti-biotic. Despite a remarkable attempt at stimulating demand – through the acceptance of large fiscal deficits and the dual attack of conventional and unconventional monetary policy – things seems to getting worse albeit more slowly. This seemed to me to be gist of the core message from the first of the Lionel Robbins lectures delivered by the 2008 Nobel Prize Winner for Economics, Professor Paul Krugman of Princeton speaking at the LSE this evening. A2 Macro, Cycles and Shocks, Macroeconomic Policies, Fiscal Policy, Monetary Policy, OECD Economies, US Economy, Teaching of Economics, UK Economy, Credit Crunch, 2010-06-02T21:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/finding-new-opportunities-among-the-economic-wreckage http://www.tutor2u.net/blog/index.php/economics/comments/finding-new-opportunities-among-the-economic-wreckage#When:08:29:00Z I am reprising this blog entry from a year ago partly because Robert Frank is one of my teaching heroes. But also because his idea of a steeply progressive consumption tax continues to have such resonance today as we seek to find ways of re-balancing our economic systems away from excessive and often wasteful consumption towards saving and productive investment. Read on and you will find out about positional goods, status races and the case for taxing consumption more and saving less. A2 Macro, AS Macro, Behavioural Economics, Economic Growth, Macroeconomic Policies, Fiscal Policy, OECD Economies, US Economy, Teaching of Economics, UK Economy, Credit Crunch, 2010-06-01T08:29:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/warnings-of-hysteresis-for-the-eu-economy http://www.tutor2u.net/blog/index.php/economics/comments/warnings-of-hysteresis-for-the-eu-economy#When:12:05:00Z This is an updated blog post on the topic of hysteresis in the EU economy. The recession and financial crisis may lead to a permanent loss in potential economic output and a slower trend rate of growth in the future according to a study by the European Commission. The fall in potential GDP will be an example of hysteresis effects across the European economy and the cyclical downturn in output and jobs creates long term damage. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Supply, Economic Growth, European Economy, Global Economy, Credit Crunch, OECD Economies, Spain Economy, US Economy, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2010-05-29T12:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-us-economy-chartroom http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-us-economy-chartroom#When:13:44:00Z Here is a new revision presentation (and slide handout) highlighting key economic data and trends for the US economy. How strong is the early stage of recovery from the recession? In a related blog post I consider some of the ways in which economic events in the USA affect trade, investment and prices in the British economy. View revision presentation on US Economy Chartroom Download printable (pdf) handout AS and A2 Specifications, AQA Economics Unit 4, Economics Presentations, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, OECD Economies, US Economy, 2010-05-23T13:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-the-us-and-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-the-us-and-the-uk-economy#When:11:44:00Z This revision note covers some of the macroeconomic connections between the UK and the USA economy. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Cycles and Shocks, Global Economy, OECD Economies, US Economy, UK Economy, 2010-05-23T11:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-data-description-revision-on-bop http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-data-description-revision-on-bop#When:14:01:01Z Just as with your AS exams from one year ago, AQA unit 4 macro papers contain data response questions and the first part involves drawing evidence from statistics either in table or chart format - a good example is the one above which tracks the current account balances for the UK and the USA from 1995 onwards. Note that 2010 and 2011 are labelled as forecasts - always something to pick up on when writing about the data in your answer. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Exchange Rates, Global Economy, International Trade, OECD Economies, US Economy, Teaching of Economics, 2010-05-22T14:01:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/roubini-at-the-lse-governments-run-out-of-policy-bullets http://www.tutor2u.net/blog/index.php/economics/comments/roubini-at-the-lse-governments-run-out-of-policy-bullets#When:10:27:00Z The LSE was packed tonight for a talk and discussion with Nouriel Roubini. It was an occasion to help launch his latest book “Crisis Economics” and Roubini started by arguing that financial crises are now more common than is supposed. Economics textbooks pay lip-service to crises and the conventional wisdom is that systemic crises in the markets are irregular and few and far between. Dr Doom takes a completely different stance believing that the sorts of crises that have dominated the headlines in recent years are best described as White Swans rather than the Black Swans beloved of Nicholas Taleb. The Roubini lecture is now available on video using this link AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Emerging Economies, Financial Markets, OECD Economies, US Economy, Teaching of Economics, UK Economy, Credit Crunch, 2010-05-20T10:27:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/stiglitz-on-usa-china-protectionism-is-protectionism-occuring http://www.tutor2u.net/blog/index.php/economics/comments/stiglitz-on-usa-china-protectionism-is-protectionism-occuring#When:19:22:00Z The India Times features an article penned by Professor Stiglitz regarding an impending trade war between the USA and China. The case as it has been for many years is the assertion that China should be regarded as a ‘currency manipulator’! OECD Economies, US Economy, 2010-04-17T19:22:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/broadband-and-economic-growth http://www.tutor2u.net/blog/index.php/economics/comments/broadband-and-economic-growth#When:14:52:00Z Investment in broadband capacity and speed has a strong impact on economic growth according to new research. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Capital Investment, Economic Growth, Economics of Technology, International Trade, Macroeconomic Policies, Supply-side policies, OECD Economies, US Economy, 2010-04-03T14:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fed-pledges-to-keep-policy-rates-exceptionally-low http://www.tutor2u.net/blog/index.php/economics/comments/fed-pledges-to-keep-policy-rates-exceptionally-low#When:22:46:00Z Here is an interesting approach to interest-rate setting by the US Central Bank - the Federal Reserve. The Fed has pledged to maintain ultra-low interest rates for the time being in a bid to support and sustain a recovery in domestic demand and output and reduce the risk of a double-dip recession later on this year. A2 Macro, AS Macro, Macroeconomic Policies, Monetary Policy, OECD Economies, US Economy, Teaching of Economics, 2010-03-16T22:46:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-rate-rise-causes-hot-flows-of-money http://www.tutor2u.net/blog/index.php/economics/comments/us-rate-rise-causes-hot-flows-of-money#When:09:45:00Z This is a good example for AS students which illustrates how a change in interest rates can affect the exchange rate. Late on Thursday the US Federal Reserve raised their discount rate - the price at which banks borrow emergency money from the Fed - from 0.5% to 0.75%. The move was unexpected, and has given rise to plenty of speculation that they will follow this with a rise in their federal funds rate - the benchmark rate at which banks lend to each other and is used to set rates on mortgages and car loans. That means that currency speculators have bought the dollar heavily, betting on further rate rises and pushing the exchange value of the dollar up to a nine-month high against a basket of other currencies. The swift response in exchange markets shows exactly how freely floating exchange rates can be directly affected by a change in interest rates. As BBC News and the Telegraph report, central bankers are deeply concerned that such speculation could slow growth in output just as recovery is beginning, and officials from the Fed have been active in offering reassurance that the promise to keep rates low for an extended period remains in place. “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy,” the Fed said. In spite of that, the massive foreign exchange market is still looking for a chance to make a profit by buying the dollar now. AS Macro, Balance of Payments, Exchange Rates, Macroeconomic Policies, Monetary Policy, OECD Economies, US Economy, Teaching of Economics, 2010-02-20T09:45:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/lively-articles-on-the-fiscal-stimulus-debate http://www.tutor2u.net/blog/index.php/economics/comments/lively-articles-on-the-fiscal-stimulus-debate#When:11:37:00Z “Around the world over the last century, the typical financial crisis caused the jobless rate to rise for almost five years, according to work by the economists Carmen Reinhart and Kenneth Rogoff.” David Leonhardt - writing in the New York Times - praises the employment effects of the Obama stimulus programme in a super piece. Judging Stimulus by Job Data Reveals Success And over at the Financial Times, the ever-readable Martin Wolf considers the thickness of the fiscal tightrope facing the US government and other leading economies. “The argument is, rather, that the benefits of the higher output today exceed the costs of debt service tomorrow ....high-income countries face huge fiscal challenges. And yes, the crisis-hit countries start from grossly unsustainable fiscal positions. But the US is not Greece. Moreover, a massive fiscal tightening today would be a grave error.” More here And here is the link to last week’s feature in the Independent on the views of economist Joseph Stiglitz: The Money Man: Super-economist Joseph Stiglitz on how to fix the recession All three of these articles will stretch and challenge A2 economists wanting to understand more about the big fiscal issues facing governments at the moment. A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, Macroeconomic Policies, Fiscal Policy, Keynesian Economics, OECD Economies, US Economy, Teaching of Economics, UK Economy, Recession Watch, 2010-02-17T11:37:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/get-interactive-with-the-us-economy http://www.tutor2u.net/blog/index.php/economics/comments/get-interactive-with-the-us-economy#When:00:20:00Z You’ve just got to love interactive graphics like this one.  Updated every month, this looks amazing on an IWB too.  A nice touch - top right hand corner provides a brief explanation of the economic data variable being charted. A2 Macro, OECD Economies, US Economy, 2010-01-30T00:20:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/krugman-on-chinese-mercantilism http://www.tutor2u.net/blog/index.php/economics/comments/krugman-on-chinese-mercantilism#When:21:36:00Z My dictionary suggests that mercantilism is governmental regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers. Answers.com says that the term historically refers to policies designed to accumulate bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade. China’s trade and exchange rate policies have been a subject of heated controversy for many years and, as we head into a new year, Nobel prize winning economist Paul Krugman launches an attack on Chinese mercantilism which he argues has cost over a million jobs in the USA. “We know that China is pursuing a mercantilist policy: keeping the renminbi weak through a combination of capital controls and intervention, leading to trade surpluses and capital exports in a country that might well be a natural capital importer. We also know, or should know, that this amounts to a beggar-thy-neighbor policy — or, more accurately, a beggar-everyone but yourself policy — when the world’s major economies are in a liquidity trap.” Lots in this short paragraph for students: 1/ How can capital controls and intervention affect the value of the Chinese exchange rate? 2/ Using your understanding of the balance of payments, explain how trade surpluses can lead to capital exports. Identify some of the longer-term effects of these capital exports. 3/ Why does mercantilism represent a beggar-thy-neighbour policy? With what consequences for the world economy? 4/ What policies are available for governments wanting to reduce trade imbalances?   A2 Macro, Emerging Economies, China Economy, Global Economy, International Trade, OECD Economies, US Economy, Teaching of Economics, 2010-01-01T21:36:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/deindustrialisation-10-us-industries-in-jeopardy http://www.tutor2u.net/blog/index.php/economics/comments/deindustrialisation-10-us-industries-in-jeopardy#When:18:58:00Z A fascinating analysis from Business Insider highlights 10 major industries that have been a core part of the US economy which seem to be in terminal decline.  A great resource to begin a lesson looking at issues of business costs, competitiveness and the impact of globalisation on manufacturing. It would be interesting for students to prepare a similar list of UK industries which might suffer a similar fate (there must be some crossover) Business Economics, Competitive Markets, Economies of Scale, Economic Growth, Economics of Technology, Manufacturing Industry, OECD Economies, US Economy, 2009-12-14T18:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/who-is-hit-hardest-by-unemployment http://www.tutor2u.net/blog/index.php/economics/comments/who-is-hit-hardest-by-unemployment#When:10:27:01Z One sad consequence of the global recession is rising unemployment.  The figure in the US hit 8.6% of the workforce in September 2009 – with further rises anticipated.  You may well have given thought both to why these increases are occurring and even how unemployment is measured.  Here’s another query: which groups in America have been hardest hit? A2 Macro, AS Macro, Labour Market, Unemployment, Recession Watch, US Economy, 2009-11-18T10:27:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/reasons-to-expect-a-nike-swoosh-recovery http://www.tutor2u.net/blog/index.php/economics/comments/reasons-to-expect-a-nike-swoosh-recovery#When:08:10:00Z A failure of trust in global financial markets lies at the heart not just of the current recession but prospects for a sustained recovery in spending and jobs. Whilst journalists play the game of alphabet soup to describe the likely shape of the economic cycle, we might be better off thinking in terms of a Nike Swoosh. World growth is responding to an unprecedented policy stimulus but there is a real danger that the rebound inactivity will be constrained by a set of negative forces pushing down on growth. This was the message from Paul Donovan, Managing Director of Global Economics for UBS in his presentation to the Eton College Keynes Society last night. A2 Macro, AS Macro, Cycles and Shocks, Financial Markets, Teaching of Economics, UK Economy, Recession Watch, Unemployment, Credit Crunch, US Economy, 2009-11-13T08:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/will-they-wont-they-will-they http://www.tutor2u.net/blog/index.php/economics/comments/will-they-wont-they-will-they#When:21:58:00Z Ahead of President Obama’s visit to Asia, earlier this week, the Chinese central bank issued a report signalling its intention to perhaps consider allowing a more flexible exchange rate regime come into force. A2 Macro, Balance of Payments, Emerging Economies, China Economy, Exchange Rates, International Trade, US Economy, 2009-11-12T21:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-unemployment-breaking-down-the-data http://www.tutor2u.net/blog/index.php/economics/comments/us-unemployment-breaking-down-the-data#When:18:28:00Z A fascinating interactive infographic from the New York Times which allows you to segment the trends in US unemployment by a series of variables, including ethicity, age and educational background.  Well worth a quick look US Economy, 2009-11-10T18:28:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-jobless-figure-climbs-above-10-per-cent http://www.tutor2u.net/blog/index.php/economics/comments/us-jobless-figure-climbs-above-10-per-cent#When:18:53:00Z It perhaps has a political significance greater than its marginal economic impact - but when one worker in ten is out of work, an economy truly is on the verge of mass unemployment. The US economy is showing signs of a rebound in demand and production but the labour market data continues to show the depth of the preceding slump. Over eight million Americans have now lost their job since the start of the recession in December 2007, with more than 15m Americans now out of work. Here are some links to coverage of this news. Guardian: US jobless rate hits 10% Independent: Sharp rise in US unemployment figures A2 Macro, AS Macro, Unemployment, Credit Crunch, US Economy, 2009-11-06T18:53:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-us-economy-rebounds-teacher-presentation http://www.tutor2u.net/blog/index.php/economics/comments/the-us-economy-rebounds-teacher-presentation#When:14:58:00Z   Here is a topical teacher presentation that provides a snapshot of, and commentary on key economic data from the US as the world’s largest economy starts to pick up from the depths of the recession. Many questions remain not least the durability of a recovery and the extent to which the US experiences a jobless recovery. Launch streamed, interactive version - US Economy Rebounds Download pdf handout of slides: Mark Mardell reports on the latest US economic data in this BBC news video. Hamish McRae also reports on the state of health of the US economy in this piece from the Independent. A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, Recession Watch, US Economy, 2009-10-30T14:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/walmart-and-amazon-price-war-hyper-efficiency-and-the-consumer http://www.tutor2u.net/blog/index.php/economics/comments/walmart-and-amazon-price-war-hyper-efficiency-and-the-consumer#When:11:15:00Z A well publicised price war has broken out in the United States between Walmart and Amazon. Wal-Mart’s $10 promotion applies to the top 10 books coming out in November but the company is also selling 200 best-sellers for 50% of their list price. In a move that has sent shock-waves through the book industry, Wal-Mart has announced it will be selling 10 forthcoming books for just $10 each including Sarah Palin’s autobiography. As is often the case when an aggressive price war breaks out in an oligopolistic market, online bookseller Amazon matched the price cut within hours causing Wal-Mart to cut again to $9. Amazon returned the favour and Walmart has sinced shaved one cent to $8.99! The FT reports that Walmart’s website, the second busiest in the US after Amazon, has also cut prices by 50 per cent on 200 best-sellers. The battle comes at a time when both Walmart and Amazon are under pressure from Google who are rolling out an online site capable of delivering e-books to any device with a Web browser, with an initial library of about half a million titles. How long the price war will last is open to question. The October-December season is a hugely important time for all booksellers - the festive period is the peak time for sales and the intense battle for market share comes at a time of great change in the industry - not least the rapid growth of e-readers and online libraries. Some book publishers fear a price anchoring effect on their industry - namely that Walmart slashing prices and rivals following suit will lead book-buyers to expect new titles to cost $10, a low prices that would force the publishing industry to re-scale its entire business, including the advances paid to writers and ultimately affect the range of titles on offer. For the giants of the book retailing industry, the economies of scale and drive for hyper efficiency in getting products to the market are simply a way of reinforcing their market dominance. But what about the impact on smaller independent booksellers most of whom can never hope to compete on price but who provide light and shade in the book selling industry. It is a reminder that there are different types of efficiency. Allocative, productive, dynamic and social. The latter two may be damaged if the price war escalates and many smaller booksellers go under. This BBC world service news interview focuses on some of the cultural issues of the rise of the giant retailers. Chris Doeblin from the independent Book Culture shop in New York City accepts that supermarkets will bring the price of books down - as they have with food prices - but at a (social) cost to many of us. Guardian: US bookshops urge regulator to investigate online price war A2 Micro, AS Micro, Business Economics, Economies of Scale, Oligopoly, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, US Economy, 2009-10-23T11:15:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/paul-mason-on-the-future-for-the-dollar http://www.tutor2u.net/blog/index.php/economics/comments/paul-mason-on-the-future-for-the-dollar#When:10:19:00Z Paul Mason’s excellent short video report appeared on Newsnight last Friday and it considers whether the US dollar (currently weak in global currency markets) will continue to ebb away as the reserve currency of choice for international transactions? The Yen and the Euro are making strides and there is pressure from the Chinese for a new currency to emerge perhaps as a development of the special drawing rights organised by the IMF. The BBC video links to a follow up discussion featuring Irwin Steltzer and Linda Yueh from Oxford University. A good discussion-starter for A2 macroeconomists. Watch Are dollar’s days as world currency numbered? A2 Macro, Emerging Economies, Exchange Rates, Global Economy, International Trade, Teaching of Economics, US Economy, 2009-10-20T10:19:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-case-study-in-labour-mobility-50-jobs-in-50-weeks http://www.tutor2u.net/blog/index.php/economics/comments/a-case-study-in-labour-mobility-50-jobs-in-50-weeks#When:14:04:00Z Perhaps we should expect nothing less from an unemployed Economics graduate, heavily in debt who had become desperate in search of a fulfilling job. Californian Dan Seddiqui went from being homeless and unemployed to getting 50 different jobs in 50 different US states in just 50 weeks and his story is featured in today’s Daily Telegraph “In just 50 weeks Dan tried everything from being a lobster catcher, a jazz conductor, a TV weatherman and even a Las Vegas wedding planner.” Naturally a book is on the way! This article is perfect as a starter teaching resource when discussing occupational and geographical mobility of labour and the natural and structural barriers that prevent others doing something similar in their search for worthwhile work.   A2 Macro, AS Macro, Labour Market, Market Failure, Factor Immobility, Teaching of Economics, Unemployment, Quirky Trivia, US Economy, 2009-10-15T14:04:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/income-inequality-in-the-usa http://www.tutor2u.net/blog/index.php/economics/comments/income-inequality-in-the-usa#When:17:59:00Z The Economist carries a short feature on the scale of income inequality in the USA and finds that a quarter of America’s total income is earned by the top 1% of the population. “The concentration of income earned by this top percentile now stands at its highest since 1928. Two-thirds of the country’s total gains in the five years to 2007 accrued to the top 1%, whereas the bottom 90th percentile saw only 12% of the extra income.” We have been looking at income inequality as part of our study on measuring the standard of living. Wikipedia carries up to date information on measures such as the Gini coefficient for countries where the relevant data is available. A2 Macro, AS Macro, Poverty and Inequality, Standard of Living, US Economy, 2009-10-09T17:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/six-countries-in-recovery http://www.tutor2u.net/blog/index.php/economics/comments/six-countries-in-recovery#When:17:37:00Z Ahead of the G20 summit, CNN money provides an overview of six countries that look on the path to recovery ... or at least are heading down the slip road…...good macro background for A2 economists wanting to understand the economic cycle. A2 Macro, UK Economy, Recession Watch, US Economy, 2009-09-24T17:37:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/protectionism-and-the-free-market-economist http://www.tutor2u.net/blog/index.php/economics/comments/protectionism-and-the-free-market-economist#When:05:52:00Z The Economist magazine is furious with Barack Obama for his announcement of a 35% import tax on tyres from China. The writer looks at the role of world trade in the extraordinary burst of growth that globalisation has triggered, which has “lifted hundreds of millions out of poverty over the past few decades and brought lower prices to consumers everywhere.” The effect is being threatened now though, as world trade is predicted to fall by 10% in 2009 and many countries attempt to help their domestic industries with subsidies or new tariffs on imports: the Economist quotes a report from the Geneva-based World Trade Alliance claiming that, on average, once every three days a G20 member has broken the no-protectionism pledge they made at the summit in April. Specifically, they look at the potential problems to be caused by the new import tax on Chinese tyres: either consumers will have to pay more for tyres made more expensively in the domestic economy, which will cause the motor trade to suffer, or buyers will simply switch to an alternative source of low cost imports, from India or Malaysia, in which case the US jobs will be lost anyway, and in either case there is the risk of provoking retailatory measures from China. Does one small measure of protectionism matter? The selective steel tariffs introduced by George Bush on imports from China in 2002 had very little effect on trading relations between the two nations in the long-run. The Economist thinks that this is different, and that America has to take a leading role in resisting the temptation to protect, but also largely because they are reliant on the Chinese as major buyers of the government bonds that are financing America’s massive fiscal deficit. Emerging Economies, Development Economics, China Economy, International Trade, US Economy, Fiscal Policy, 2009-09-18T05:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/obama-treads-a-difficult-path-with-chinese-tyre-tariffs http://www.tutor2u.net/blog/index.php/economics/comments/obama-treads-a-difficult-path-with-chinese-tyre-tariffs#When:10:58:00Z One aspect of the global trade recession in 2008-09 has been the resurgence of protectionist tendencies as countries have lined up to introduce fresh barriers to trade in goods and services. The pressures for import protectionism in the form of tariffs, quotas and other barriers is largely driven by politics and there is a new example to dissect with the news that the US government is to raise the import tariff on low-grade Chinese tyres following a petition filed by the United Steelworkers trade union, which represents workers at many US tyre factories. Chinese exporters will be subject to 35% import tariffs (taking effect on September 26th) which will decline to 30% in the second year and 25% in the third. A2 Macro, AS Macro, Emerging Economies, China Economy, Global Economy, Government Intervention, Indirect Taxes, International Trade, Manufacturing Industry, US Economy, 2009-09-13T10:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/more-aftershock-resources http://www.tutor2u.net/blog/index.php/economics/comments/more-aftershock-resources#When:07:04:01Z The ‘Aftershock’ section of the BBC website continues to come up with good stuff about causes and effects of the credit crisis and recession. If you missed the first part of their 3-part documentary series ‘The Love of Money’ you can still watch it on BBC i-player, and it is well worth doing so as it examines the collapse of Lehman Brothers and the consequences for the world’s economy. Now they have two interactive features examining the way in which national debt has built up during the bail-outs covered by the programme, one focussing on the UK economy, looking at how a total of £1.5trn, or 94% of GDP, has been spent. One of the slides here estimates that in 2014 taxes will have to cover £60bn in interest payments on that debt alone, equivalent to the entire budget for education for the year, or over 50% of the spending on the NHS. The second looks at the breakdown of bail-out debt around the world, adding up to £10.8trn, and includes an analysis of shrinkage in the global economy and the wealth effect on homeowners and pensioners. Both could be useful not only in reminding A2 students of the events of the last year and their potential impact on the economy but also introducing AS students to the macroeconomic aspects of The Economic Problem, as resources are going to be very scarce indeed in the next few years, and choices about which needs and wants should be satisfied will be key economic and political debates. A2 Macro, AS Macro, Global Economy, Credit Crunch, UK Economy, US Economy, 2009-09-12T07:04:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/chinas-concern-over-us-monetary-expansion http://www.tutor2u.net/blog/index.php/economics/comments/chinas-concern-over-us-monetary-expansion#When:19:36:00Z As the US effectively prints more money, Chinese officials are expressing concern over the impact that this will have on their economy A2 Macro, AS Macro, Emerging Economies, China Economy, Exchange Rates, US Economy, Monetary Policy, 2009-09-09T19:36:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/recession-prompts-a-return-to-protectionism http://www.tutor2u.net/blog/index.php/economics/comments/recession-prompts-a-return-to-protectionism#When:16:39:00Z Here is an important article by Phil Thornton from Clarity Economics which flags up attempts by a group of trade economists to monitor the growing scale of explicit and hidden forms of protectionism in global trade. International trade in goods and services is forecast to contract by nearly ten per cent in 2009 and across the world, countries are either considering or have already introduced a raft of distortionary import controls. Protectionism is spreading from the purely economic (i.e. changes in import duties, subsidies and quotas) to the financial (linking financial bail outs to national economic objectives) and also affecting the labour market (e.g. changes to immigration policies / points systems) - the rise of ‘new protectionism’  threatens to cause further de-globalisation and increase the risks of beggar-thy-neighbour retaliation that could stall a trade-based recovery. “Global Trade Alert (GTA), which was launched in June, had identified 67 discriminatory measures by July 8, of which 47 had been implemented with 20 waiting in the wings. Discriminatory measures include rises in tariffs that importers must pay or bans on products. Examples include a ban by Saudi Arabia on imports of cars older than five years and a 39 per cent increase in tariffs on Russian oil exports to Belarus.” Phil’s Times article is here Global Trade Alert (GTA) A2 Macro, AS Macro, Balance of Payments, Emerging Economies, European Economy, Global Economy, Credit Crunch, Government Intervention, Government Failure, International Trade, UK Economy, Recession Watch, US Economy, 2009-07-28T16:39:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/emerging-leaner-stronger-fitter-from-the-recession http://www.tutor2u.net/blog/index.php/economics/comments/emerging-leaner-stronger-fitter-from-the-recession#When:07:13:00Z Hamish McRae considers how businesses are responding to the challenges of recession in his Economics Life piece in the Independent this morning. Drawing on a new report from management consultants Arthur D Little he considers some of the strategies that businesses are adopting given the special nature of this downturn. Improving hygiene, fitness and building muscle ahead of the recovery figure prominently and there is a fascinating graphic illustrating some of the priorities of firms at this unusual time. “Businesses that do survive the present harsh climate will emerge in much better shape. All downturns speed up the process of structural change in the sense that things that were going to happen anyway happen much faster that they would have done. But the speed of this one has been so extreme that the world is cramming a decade of such change into a year or 18 months. As a result a lot of firms that still appear weak right now may emerge in rather good shape when demand returns.” Improving hygiene: Actions to cope short-term with the implosion of confidence and collapse of demand e.g. rationalising operations and cutting overhead costs, turning fixed costs into variable costs: 80-90 per cent of business respondents are giving these actions very high or high priority. Fitness: Keeping talent on board is a very high or high priority for 82 per cent of respondents. Maintaining R&D and innovation expenditures is a very high or high priority for 67 per cent of respondents. Muscle Building: preparing for the world to come beyond the downturn, for example building stronger relationships with regulators or a high priority to preparing for the low-carbon economy Arthur D Little Prism magazine A2 Macro, A2 Micro, Business Economics, Manufacturing Industry, UK Economy, Recession Watch, Credit Crunch, US Economy, 2009-07-24T07:13:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/housing-the-global-economic-crisis http://www.tutor2u.net/blog/index.php/economics/comments/housing-the-global-economic-crisis#When:15:50:00Z Lecture slides from the recent Housing Markets and the Global Financial Crisis presentation at the LSE are available here GCSE Economics, Credit Crunch, US Economy, 2009-07-23T15:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/borrow-now-inflation-later-art-laffer http://www.tutor2u.net/blog/index.php/economics/comments/borrow-now-inflation-later-art-laffer#When:22:23:00Z Steve Evans interviews supply-side Economist Art Laffer - notorious for the Laffer Curve - who typically flags up some of the perceived dangers of government borrowing during a recession. This link takes you to the audio of the interview A2 Macro, AS Macro, Cycles and Shocks, Inflation and Deflation, UK Economy, Credit Crunch, US Economy, Fiscal Policy, 2009-07-18T22:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/taking-the-pulse-of-the-global-economy http://www.tutor2u.net/blog/index.php/economics/comments/taking-the-pulse-of-the-global-economy#When:12:42:00Z The BBC news website is running a series of articles taking the pulse of the global economy - these will appear during the summer months - a resource that will no doubt be well worth following. Here is the link. A2 Macro, AS Macro, Emerging Economies, Cycles and Shocks, Global Economy, UK Economy, Recession Watch, US Economy, 2009-07-14T12:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-scaling-back-of-general-motors http://www.tutor2u.net/blog/index.php/economics/comments/the-scaling-back-of-general-motors#When:09:30:00Z General Motors is back on the road only forty days after filing for bankruptcy. This is a good example to use of a failed business that is seeking to reinvent under state ownership itself by dramatically scaling back the size and scope of its operations. The Guardian reports that ” The US government owns 60.8% of the new GM, while Canada’s government holds 11.7% and a union-controlled pension fund has 17.5%. Creditors of the old company, who were owed $27bn (£16.67), were compensated with a stake of just 10% to the dismay of Wall Street bondholders who fought a short, unsuccessful battle for a larger slice. But the transformation has been painful for thousands of employees, parts suppliers and car dealers. Once cutbacks are complete in 2011, GM is likely to have just 38,000 blue-collar factory workers in the US, compared to 113,000 three years ago. The number of GM plants will fall from 47 to 31 and, through a clear-out of senior management, GM’s executive team will shrink by 35%.” Leaner and meaner? There is chronic surplus capacity in the global car industry and General Motors will not be the only business to realise the burden of diseconomies of scale. Smaller businesses are frequently more nimble and innovative. A2 Micro, Business Economics, Economies of Scale, US Economy, 2009-07-12T09:30:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/king-and-chancellor-at-odds-over-intervention http://www.tutor2u.net/blog/index.php/economics/comments/king-and-chancellor-at-odds-over-intervention#When:05:52:00Z Both the Chancellor of the Exchequer and the Governor of the Bank of England gave their Mansion House speeches to the City yesterday, and both addressed the issue of regulation of the banking system. But while the Chancellor emphasised that he had no plans to fundamentally change the regulation system, the Governor called for more powers for the Bank to intervene and prevent excessive risk taking. This is at odds with the approach outlined by Alastair Darling, who referred instead to encouraging a change of management culture in the banks which would encourage bankers to manage themselves more effectively, being “rewarded for long-term success, not for failure”. He seems to suggest that the solution lies more in ensuring that banks are led by Boards of Directors with “the right people of the right skills and the right experience …. and they need to be equipped to ask the right questions.” He also called for an end to short-termism: “Their focus must be on long-term wealth creation and not short-term profits.” A2 Micro, Government Intervention, Regulation, UK Economy, US Economy, Monetary Policy, 2009-06-18T05:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/barak-sees-mileage-in-fuel-efficiency-targets http://www.tutor2u.net/blog/index.php/economics/comments/barak-sees-mileage-in-fuel-efficiency-targets#When:18:57:00Z Here is a good example of government intervention through regulation “Under the proposed new standards, manufacturers must reach an average of 39 miles per gallon for passenger cars by 2016, and 30 miles per gallon for light lorries…The increase in mileage is to be introduced gradually, and is expected to add $1,300 to the cost of a vehicle by the time it is fully implemented in 2016.” In a similar vein, the EU has progressively cut the maximum Co2 emissions per km for all passenger cars.   1. Think about how this type of regulation will affect producers both in the short and the long term.   2. How will this affect consumers? Is it (a) effective (b) does it promote efficiency? (c) Is it equitable?   3. What are some of the possible macroeconomic effects of such an intervention? Regulation is an alternative to taxation and/or subsidy ... or should we regard it as a complement? Part of a mix of policies needed to address environmental issues and targets? A2 Micro, AS Micro, Business Economics, Cost Benefit Analysis, Environmental Economics, Government Intervention, Regulation, Market Failure, Externalities, Transport Economics, US Economy, 2009-05-19T18:57:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/truck-tariffs-and-unintended-consequences http://www.tutor2u.net/blog/index.php/economics/comments/truck-tariffs-and-unintended-consequences#When:12:22:00Z The USS protects its domestic vehicle market with a twenty-five percent tariff on imported trucks. By contrast, the import tariff on regular automobiles is just 2.5 percent and the tariff on components imported to make trucks is also far less than 25 per cent. Little wonder that foreign companies have over the years made a bee-line for the USA to make trucks and that many car-makers have only put three doors on a SUV so that they can be classified as vans. This guest post by Jim Lawrence on Dani Rodrik’s web site is excellent on some of the unintended consequences of distortionary tariffs. A2 Macro, International Trade, US Economy, 2009-05-10T12:22:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/obamas-pledge-on-rd http://www.tutor2u.net/blog/index.php/economics/comments/obamas-pledge-on-rd#When:21:19:00Z “I am here today to set this goal: we will devote more than 3% of our GDP to research and development,” If Obama succeeds in his aim, the US economy will raise investment in research and development as a share of national income - AS students might consider some of the likely demand and supply-side effects of such an aim. A good article to use when teaching supply-side policies. The UK of course is some distance below the US levels when it comes to research and development spending. AS Macro, Cycles and Shocks, Aggregate Supply, Economic Growth, UK Economy, US Economy, Supply-side policies, 2009-04-27T21:19:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/recession-cuts-the-us-trade-deficit-in-half http://www.tutor2u.net/blog/index.php/economics/comments/recession-cuts-the-us-trade-deficit-in-half#When:10:51:00Z There has been a remarkable turnaround in the size of the monthly trade deficit in goods for the US economy. This prompted plenty of useful discussion in our AS macro class today when we revised government policies towards the balance of payments. A2 Macro, AS Macro, Balance of Payments, Cycles and Shocks, Aggregate Demand, Recession Watch, US Economy, 2009-04-27T10:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/taking-up-the-slack http://www.tutor2u.net/blog/index.php/economics/comments/taking-up-the-slack#When:11:10:00Z A super piece here on the US economy from the New York Times which links in with the concept of the output gap and the time lags between an economic recovery starting and when we might expect to see growth and jobs return at a reasonable speed. A2 Macro, US Economy, 2009-04-08T11:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-jobs-crisis http://www.tutor2u.net/blog/index.php/economics/comments/us-jobs-crisis#When:09:39:00Z When the biggest economy in the world goes into a deep recession it is inevitable that the scale of the job losses hitting main street America will be enormous. But when over 600,000 jobs are shed in a single month it becomes clear just how severe the labour shake-out has been in the United States since recession started in earnest in the late autumn of 2007.  The US labor market has shed four million jobs since Lehman collapsed in September 2008 and the last time the US economy shed as many jobs in a single month was in October 1949. A2 Macro, AS Macro, Global Economy, Credit Crunch, Labour Market, Unemployment, US Economy, 2009-04-06T09:39:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-reserve-currency http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-reserve-currency#When:11:07:00Z This question is in the news at the moment. The Chinese central bank has proposed replacing the US dollar as the world’s reserve currency with a new hybrid currency controlled by a beefed up International Monetary Fund. Economics Q&A, Q&A - Macro, A2 Macro, Emerging Economies, European Economy, Exchange Rates, Global Economy, US Economy, 2009-03-29T11:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/mexico-a-rough-deal-from-nafta http://www.tutor2u.net/blog/index.php/economics/comments/mexico-a-rough-deal-from-nafta#When:07:27:00Z Article on whether Mexico has gained from membership of NAFTA The North American Free Trade Area (NAFTA) includes Mexico, the USA and Canada, and was introduced back in 1994. Whilst the USA and Canada are highly developed countries, Mexico is officially classed as a middle-income country (GDP per head is only around a quarter of that in the USA). Comparative advantage suggests that all countries can benefit from free trade. Many Mexicans, however, believe this isn’t true and that they’ve lost out as a result of their NAFTA membership. A2 Macro, AS Macro, Emerging Economies, Global Economy, International Trade, US Economy, 2009-03-27T07:27:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/infrastructure-and-growth-2 http://www.tutor2u.net/blog/index.php/economics/comments/infrastructure-and-growth-2#When:16:15:00Z A hat tip to my colleague Jon Mace for spotting this rather good BBC news article that considers the role that investment in infrastructure can have in sustaining and promoting economic growth. It is a good example of how government spending (fiscal policy) can affect both aggregate demand and long run aggregate supply. And it raises important questions about how such projects are funded. A2 Macro, AS Macro, Cost Benefit Analysis, Cycles and Shocks, Aggregate Demand, Capital Investment, Economic Growth, GCSE Economics, US Economy, Fiscal Policy, Supply-side policies, 2009-03-25T16:15:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/imbalances-and-the-economic-crisis http://www.tutor2u.net/blog/index.php/economics/comments/imbalances-and-the-economic-crisis#When:11:14:01Z James Bevan, Chief Investment Officer CCLA Investment Management Limited gave a talk to the Eton College Keynes Society on Thursday - it was full of insight into the causes of the financial crisis and the chances of a sustained recovery in the next year or two. A2 Macro, AS Macro, Emerging Economies, China Economy, Indian economy, Cycles and Shocks, Global Economy, Credit Crunch, UK Economy, Recession Watch, US Economy, 2009-03-15T11:14:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/dodgy-thermostats-and-the-global-crisis http://www.tutor2u.net/blog/index.php/economics/comments/dodgy-thermostats-and-the-global-crisis#When:13:23:00Z I have attached some notes from an excellent seminar given last night by Stephen King, Chief Global Economist of HSBC to a large group of keen AS and A2 economists. The Egerton Room at Eton College was pretty packed to hear Mr King give a really clear overview of the risks facing the world economy. There are so many moving parts at the moment that no one country can fix the problems - this demands a coordinated response. And there is a real sense that macro-economic policy has lost control. With it the risk of a descent into economic nationalism and a reversal of globalisation can become acute. Seminar notes: Stephen_King_on_the_Global_Economy.pdf A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, UK Economy, Recession Watch, US Economy, Fiscal Policy, Monetary Policy, 2009-03-06T13:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/defining-our-times http://www.tutor2u.net/blog/index.php/economics/comments/defining-our-times#When:11:19:00Z As all good students of Economics know, every answer should start with a definition! David Smith’s regular article in the Sunday Times may cloud the issue, as he offers some alternative views of how to define a ‘recession’ other than the conventional “two consecutive quarters of negative GDP growth” For example, the National Bureau of Economic Research in America defines it as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”. On this basis the US economy has been in recession since the end of 2007. While for the economist Christopher Dow, recession worthy of the name was one featuring a “clear absolute fall in GDP between one calendar year and the next”, usually but not always followed by a second fall. David Smith goes on to examine difference interpretations of what constitutes a ‘depression’ and how we will know whether we are in one or not, drawing some comparisons with recessions and depressions from the past – which might make useful reading for those students starting to think about their entry for the RES Young Economist of the Year competition. Charts used in this blog US_Charts_0209.ppt A2 Macro, AS Macro, Cycles and Shocks, Economic History, GCSE Economics, Teaching of Economics, Recession Watch, US Economy, 2009-02-17T11:19:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/trade-imbalances-presentation http://www.tutor2u.net/blog/index.php/economics/comments/trade-imbalances-presentation#When:11:38:00Z One feature of the world economy is the persistent and large scale of trade imbalances. Some countries have huge surpluses and others experience deficits every year. Trade imbalances are one factor behind the resurgence of ‘protectionist’ sentiment and they have consequences for growth, jobs and living standards. I have put together a collection of twenty of the trade data charts that I use regularly in teaching A2 and AS macro - I hope they might be useful for some colleagues when covering trade and balance of payments topics. A2 Macro, AS Macro, Balance of Payments, Emerging Economies, Cycles and Shocks, Aggregate Demand, European Economy, Global Economy, International Trade, UK Economy, US Economy, 2009-02-12T11:38:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-us-economic-recession-in-charts http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-us-economic-recession-in-charts#When:18:57:00Z Whilst much of my macro teaching for AS economics tends to focus on current developments in the UK economy, it is always useful to consider the shape of recessions and the consequences for other countries. I have used some of the charts in the accompanying presentation which draws a dozen data series from the United States. Steep increases in unemployment, a sharp decline in car production, asset price deflation and very low business confidence - there are parallels with the UK which help to reinforce the AD-AS model with my students. Chart presentation USA_Recession_Feb_09.ppt A2 Macro, AS Macro, Cycles and Shocks, US Economy, 2009-02-07T18:57:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/green-shoots http://www.tutor2u.net/blog/index.php/economics/comments/green-shoots#When:18:38:00Z An article from today’s Telegraph suggets there may be ‘Glimmers of hope on the Horizon’ for the world economy. A2 Macro, AS Macro, Emerging Economies, China Economy, Commodities Markets, Cycles and Shocks, Aggregate Demand, Capital Investment, European Economy, Global Economy, Credit Crunch, International Trade, Recession Watch, US Economy, 2009-02-05T18:38:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/protectionism-is-the-crack-of-economics http://www.tutor2u.net/blog/index.php/economics/comments/protectionism-is-the-crack-of-economics#When:18:46:00Z This is a somewhat arresting quotation from Dallas Federal Reserve president Richard Fisher - who is a former deputy US trade representative. He explains that, if the US recovery package does result in protectionism in US industry, it will give an immediate high that leads to economic death.  He is referring to the US government’s $800bn (£567bn) bailout package which includes a policy called “Buy America”  meaning that all of the projects financed by the bailout should favour American iron and steel, over imported materials. It could, perhaps, even allow American preference for all “manufactured goods”. A2 Macro, International Trade, US Economy, 2009-02-04T18:46:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/risk-of-protectionism-in-recession-policies http://www.tutor2u.net/blog/index.php/economics/comments/risk-of-protectionism-in-recession-policies#When:19:37:00Z Concerns about protectionism ending free trade agreements, as countries take measures to get their own economies out of recession and back to growth are now taking centre stage – today the EU has expressed concern about Barack Obama’s recovery package because it includes a ‘Buy American’ clause, which seeks to ensure that only US iron, steel and manufactured goods are used in projects funded by the bill. The US Congress is surely likely to feel that the $800bn it is being asked to spend should all be for the benefit of the US economy.  The EU Ambassador has expressed concern that, if passed, the measure could erode the US’s global leadership on free trade. Canada’s International Trade Minister Stockwell Day went further: “These protectionist measures, in a time of recession, only make things worse,” he told broadcaster CBC. “It can only trigger retaliatory action and we don’t want to go there.” Should the US Senate see this as a threat? A2 Macro, European Economy, Global Economy, International Trade, Recession Watch, US Economy, 2009-02-03T19:37:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/is-the-us-heading-for-a-depression http://www.tutor2u.net/blog/index.php/economics/comments/is-the-us-heading-for-a-depression#When:08:36:00Z As the above chart shows the last three months of 2008 were a significant step in the wrong direction for the US economy. Official figures showing GDP shrinking at an annualised rate of 3.8%. With many economists predicting the worst US recession since WWII how big is the danger that the US economy will slip into a depression similar to the 1930s?   US Economy, 2009-01-31T08:36:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/downturn-usa http://www.tutor2u.net/blog/index.php/economics/comments/downturn-usa#When:20:46:52Z This video from BBC news is excellent on the broad background to the financial and economic crisis in the USA - Greg Wood in New York looks back at a year of high drama in the American economy, from sub-prime to full-scale recession, as the world’s money motor seemed to stall. A2 Macro, AS Macro, Cycles and Shocks, Credit Crunch, US Economy, 2008-12-28T20:46:52+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-fed-reaches-the-floor http://www.tutor2u.net/blog/index.php/economics/comments/the-fed-reaches-the-floor#When:21:08:06Z Ground Zero for US Interest Rates The official judges on whether the United States is or is not in a downturn (the NBER) are now saying that the USA entered a technical recession at the end of last year. It takes some time for the statistics to provide concrete proof of this – a nation’s GDP data is always three to six months behind the times.  What is clear is that the world’s biggest economy is in serious trouble as the financial crisis spreads to Main Street and millions of jobs are at serious risk. To state that that millions of jobs might go is not an under-statement. Half a million jobs were lost in November alone. Yesterday the United States Federal Reserve pulled on the monetary policy interest rate lever one last time. It announced a reduction in the federal funds rate to a new level of ‘between zero and 0.25 per cent’ – which means in practice that the interest rate at which the Federal Reserve is prepared to lend to other financial institutions is now at the floor. Managing confidence and demand The main aim of lowering interest rates is simple – to drive down the cost of borrowing for consumers and businesses in an attempt to stimulate confidence and demand in the domestic economy thereby helping to stabilise output and jobs during what promises to be a deep and painful recession. Some students wonder why – if official interest rates are zero – why it is that loans, overdrafts, credit card rates and numerous other interest costs for borrowed money remain positive – often way above the so-called ‘policy rate’.  The main answer is that most loans – be it for a mortgage or an investment project for a company – are for much longer periods of time than the overnight lending or surplus funds between the banks within the inter-bank market. So a property-buyer or business looking for loan finance will pay a rate of interest equal to the ‘risk free’ interest on government securities (bonds) of similar duration plus a risk premium that the lender requires as an insurance against the loan going bad. In short - the greater the risk of a borrower defaulting on their loan, the higher is the rate of interest charged. The credit crunch has made lenders more cautious about lending – risk premium spreads have risen in most financial markets. As a result, deep cuts in policy interest rates by most of the world’s central banks have done little to reduce the real cost of credit for personal and business customers. This is one reason why monetary policy can become ineffective as a tool for managing aggregate demand. Let us head back to the decision of the Federal Reserve to cut official interest rates to zero. Does this mean that there is nowhere else for monetary policy to go to prevent a deflationary depression? Turning on the taps Not quite, some of you may have read about the possibility of the US Central Bank taking some highly unusual steps which boils down to effectively printing money to stimulate liquidity in the financial system. This is known as quantitative easing and the easiest way of describing it is to say that the central bank would buy directly different types of existing debt – say long term government bonds or the dodgy debt of the failed mortgage giants Freddie Mac and Fanny Mae – and print money to pay for their purchases. This injection of money into the economic system would boost the money supply and keep interest rates low. The Federal Reserve could – in principle – buy any outstanding assets held by the private sector of the economy – and print money to pay for them. They could guarantee to buy up fresh government debt issued by the government – for example extra government borrowing to fund President-elect Obama’s fiscal policy recovery programme. Added to this, Ben Bernanke at the Fed could announce that the central bank expects to keep short term interest rates at super-low levels for the foreseeable future – a strategy designed to embed into people’s minds that the nominal cost of borrowed money ought to remain minimal. One of the problems of the liquidity trap is that – when interest rates are driven to zero – our expectations are that the next move will be upwards and that this could happen swiftly. The Fed needs to avoid this expectation. Martin Wolf discusses many of these issues in his excellent piece in the Financial Times – available here. He flags up one idea – that the central bank could simply send everyone a cheque with some money to spend – perhaps using some time limited coupons? So in the weeks and months ahead, keep a look out for some of the key decisions of the US Federal Reserve. As students you are living through an amazing moment in nearly a hundred years of economic history. And what will the Bank of England do in response to events both here in the UK and also overseas? Is it prepared to go the distance and reduce the BoE policy rate to zero? We will find out in early January or February. Here are three follow up articles on the latest cut in US interest rates: BBC news: US rates slashed to nearly zero Guardian (Chris Payne): The Fed has waved a white flag Independent: US slashes interest rates to new zero-0.25% range Telegraph: UK needs negative interest rates, L&G warns The Times (Gerard Baker): Fed throws out the rulebook   A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, US Economy, Monetary Policy, 2008-12-17T21:08:06+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/bailing-out-detroit http://www.tutor2u.net/blog/index.php/economics/comments/bailing-out-detroit#When:18:40:00Z Leander McCormick-Goodhart looks at the perilous state of the US car market Surely nobody would allow Detroit, the backbone of American industry, to go bankrupt? In a last effort to prevent collapse of the US auto industry, Detroit is seeking a bailout. The CEOs of the big three automakers- GM, Ford and Chrysler- have appealed for a $25 billion package. Detroit has come under scrutiny, with accusations of mismanagement and the fundamental inability to reform itself. A2 Micro, AS Micro, Business Economics, Government Intervention, Subsidies, Transport Economics, Recession Watch, US Economy, 2008-11-25T18:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/another-fed-rate-cut-close-to-the-floor http://www.tutor2u.net/blog/index.php/economics/comments/another-fed-rate-cut-close-to-the-floor#When:21:48:01Z The United States Fed has cut official policy interest rates for the second time in three weeks - this time by 0.5%. This takes rates to 1% - the lowest they have been since 2004 and a recognition that the dangers of recession and deflation are in the ascendancy rather than inflation. At 1 per cent, the Fed has not left itself much room to cuts rates further if the macro-economy deteriorates. One option is for them to signal that they will keep rates on hold at low levels for the near future in a bid to unfreeze some of the credit markets and improve the flow of borrowed money available to hard-pressed businesses and homeowners. My 10 chart PowerPoint presentation provides an up-to-date chartroom view of macro developments in the US economy including US official interest rates Payroll employment Sales of motor vehicles in the USA Consumer confidence by age GDP growth and interest rates Household debt service costs CPI inflation and nominal interest rates New home sales Non-farm employment Housing starts PowerPoint: USA Macroeconomic Chartroom (29-10-08) The_Cut_in_US_Interest_Rates.ppt A2 Macro, AS Macro, US Economy, Monetary Policy, 2008-10-29T21:48:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/stagnation-and-other-breakfast-reading http://www.tutor2u.net/blog/index.php/economics/comments/stagnation-and-other-breakfast-reading#When:08:54:01Z Hamish McRae asks can we avoid the years of stagnation suffered by Japan? Larry Elliott in the Guardian reports on a stunning decline in US consumer confidence - expect the US Fed to continue their journey to take base interest rates towards zero The Financial Times reports on a steep and sudden decline in world oil production as producers respond to the collapse in prices And Tim Besley from the Monetary Policy Committee - regarded as one of the most hawkish on the MPC - says that inflation is no longer a threat .... further evidence that the MPC is likely to slash UK base rates to 3% of less in the coming months   A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, UK Economy, Recession Watch, US Economy, 2008-10-29T08:54:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/general-motors-braking-to-avoid-oblivion http://www.tutor2u.net/blog/index.php/economics/comments/general-motors-braking-to-avoid-oblivion#When:23:00:00Z It is an iconic business whose deteriorating commercial health cuts deep into the very fabric of the industrial base of the United States. I was listening to one of those early morning business programmes on radio today when a market analyst claimed that the stockmarket capitalisation of General Motors had fallen to its lowest level for fifty years. A2 Micro, AS Micro, GCSE Economics, Global Economy, US Economy, 2008-10-13T23:00:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/labour-pains-for-a-slowing-us-economy http://www.tutor2u.net/blog/index.php/economics/comments/labour-pains-for-a-slowing-us-economy#When:18:19:00Z The decision last week by the US Congress and Senate to pass a bill enacting the seven-hundred-billion dollar bail out for the bad debts of the US banking system may have provided short term relief to Wall Street traders and embattled financial institutions. But there is no denying that the labour market effects of the US slowdown are now coming sharply into focus. A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, Unemployment, US Economy, 2008-10-05T18:19:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/looking-back-over-seven-momentous-days http://www.tutor2u.net/blog/index.php/economics/comments/looking-back-over-seven-momentous-days#When:06:25:00Z It was perhaps the most remarkable seven days that any of us who have been teaching Economics for a generation or more have experienced. The financial markets risked meltdown, iconic investment banks went to the wall, indeed investment banks have more or less disappeared from Wall Street. The UK government refused to allow a major high street bank to collapse and was prepared to relax competition policy rules to nudge Lloyds-TSB into bed with HBoS. The FSA stepped in to ban short selling (Aaron Haselhurst is on great form here explaining what short selling is!) And we ended the week with an ultra-ambitious plan to nationalise the bad debts of the UK banking system in a move likely to cost the US taxpayer hundreds of billions of dollars. We shouldn’t for a moment think that the worst is over. My fear is that the UK economy and the UK government remains vulnerable to a fresh wave of negative speculation as the markets test the British government’s resolve to protect our leading financial institutions. To use a phrase once coined by a Labour Party spin doctor, last week was a good week to bury bad news. One of the stories that fell under the radar for most people was the scarcely credible increase in UK government borrowing of more than £10bn during the month of August. The five-month public sector debt level is running way above the March 2008 budget projection, and is already more than £40bn - we are now looking at a rise in government borrowing of up to 70% more than last year and the accumulation of government debt is a very worrying development for those of us who believe in the mantra that today’s borrowing is tomorrow’s taxes. In a week when consumer price inflation in the UK surged to 4.7% the macroeconomic climate facing the British economy worsens by the day. 2009 will prove a very difficult year for the economy. A selection of articles from the press today on the crisis Stephen King in the Independent: ‘Capitalism can be incredibly unstable and state intervention is back, big time’ Larry Elliot in the Guardian: This week’s financial crisis marks the end of an epoch Ken Rogoff in the Times on some of the implications of the US bail out of the financial system Financial Times editorial on the bail out Roger Bootle in the Telegraph on the limits to free markets Robert Peston’s unmissable blog including this post on the emergence of a new world order.           A2 Macro, AS Macro, Global Economy, Credit Crunch, Government Intervention, Recession Watch, US Economy, 2008-09-22T06:25:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/lehman-bros-on-the-brink-of-failure http://www.tutor2u.net/blog/index.php/economics/comments/lehman-bros-on-the-brink-of-failure#When:22:18:00Z Bear Stearns, Lehman Bros, Merrill Lynch - investment banks with incredible exposure to the sub-prime monrtgage crisis, over-extended banks with toxic bad debts exploding all over the place. At 5-44am this morning UK time, Lehman bros filed for chapter 121 bankruptcy - the 4th largest investment bank in the world has gone bust. It is going to be one hell of a garage sale as the remaining assets are sold off frantically to anyone who wants a piece of the action. “Lehman Brothers Holdings Inc. (“LBHI”) announced today that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York.” Barclays took a look at Lehman Bros and has pulled out. There is no doubt – the collapse of Lehman Bros is one of the biggest collapses in global financial history. They said thet Lehman Bros was too big to fail - they were wrong. In related news Merrill Lynch, another iconic investment bank is to be bought by Bank of America. So the 5 huge investment banks have now become 2. Next in line is AIG. Robert Peston is superb on these issues. And there is more here Share price chart lehman_bros.ppt A2 Macro, Recession Watch, Credit Crunch, US Economy, 2008-09-14T22:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/chinas-currency-manipulation-to-soften-the-slowdown http://www.tutor2u.net/blog/index.php/economics/comments/chinas-currency-manipulation-to-soften-the-slowdown#When:17:15:01Z Perhaps fearful of a steep slowdown in exports to a weakening global economy, the Chinese monetary authorities appear to be engaging in another bout of active manipulation of the Yuan in the foreign exchanges. A2 Macro, Emerging Economies, China Economy, Exchange Rates, Global Economy, International Trade, US Economy, 2008-08-26T17:15:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/grey-hairs-pensions-and-the-trend-growth-rate http://www.tutor2u.net/blog/index.php/economics/comments/grey-hairs-pensions-and-the-trend-growth-rate#When:06:17:00Z Is the ageing of the US population a contributing factor to a shrinking of the USA’s trend growth rate? Yes according to Stephen King writing in the Independent today. “As the proportion of people in retirement swells, so the burden on workers tends to increase, as does competition over resources. Whether or not people have funded pension schemes, the ultimate problem relates to claims on output. If there are fewer people in work, there may simply not be enough output to satisfy all the competing claims.” A shrinkage of the trend growth rate will have serious implications for the rate at which living standards can rise but the essence of King’s piece is that it will also contribute to growing inflationary pressures unless the USA can raise its game on productivity and/or become less unfriendly when it comes to net inward migration. It is a reminder that the root causes of inflation are not always on the demand-side. A2 Macro, Economic Growth, Inflation and Deflation, US Economy, 2008-08-04T06:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-minimum-wage-rises-to-655 http://www.tutor2u.net/blog/index.php/economics/comments/us-minimum-wage-rises-to-655#When:18:46:00Z The US federal minimum wage increases today by 70 cents on Thursday, to $6.55 per hour from $5.85. The increase will raise the minimum wage in 25 states; the other 25 have minimum wages higher than $6.55 and the move will affect around two million workers. But will rising food prices simply swallow up the real income boost that the rise in the pay floor provides? And is it wise to rack up the minimum wage at a time of recession? What will happen to employment in the low skilled segments of the US labour market?  Coverage here via the Associated Press and also the Charlotte Observer in North Carolina. Another UK restaurant chain has been exposed for paying the staff less than half of the UK minimum wage of £5.73 an hour and using tips and other gratuities to make up the difference - there is a groundswell of public opinion that this is inequitable and may require further government intervention A2 Micro, AS Micro, GCSE Economics, Government Intervention, Minimum Prices, Labour Market, US Economy, 2008-07-24T18:46:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tackling-inflation http://www.tutor2u.net/blog/index.php/economics/comments/tackling-inflation#When:18:42:01Z This superb resource from the Financial Times will be ideal for A2 and AS students wanting to understand a little more about the different approaches of the various central banks in tackling inflationary pressures through the use of monetary policy. A2 Macro, AS Macro, Inflation and Deflation, UK Economy, US Economy, Monetary Policy, 2008-07-24T18:42:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/does-anybody-have-a-cunning-plan http://www.tutor2u.net/blog/index.php/economics/comments/does-anybody-have-a-cunning-plan#When:20:44:00Z What if anything can a government do to avoid an economic recession? Especially when central bankers appear hamstrung by the risk of stagflation and the financial system is incredibly fragile. The community pages of the New York Times asked readers for suggestions! Their contributions will appear here. Recession Watch, Credit Crunch, US Economy, 2008-07-16T20:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-human-capital-in-decline http://www.tutor2u.net/blog/index.php/economics/comments/us-human-capital-in-decline#When:15:57:01Z Clive Crook’s excellent blog asks whether the US economy’s growth potential will be harmed by a forecast that “Over the coming years, baby-boomers departing from the labour force will have better educational qualifications than the younger workers replacing them. If the ultimate source of an economy’s ability to grow and prosper is its human capital, the US is in trouble.” Is there an equivalent study available for the UK?   A2 Macro, Cycles and Shocks, Aggregate Supply, Economic Growth, US Economy, 2008-07-10T15:57:01+00:00