Judging the impact of QE
The BBC carries this interesting video discussion with De Anne Julius about the impact of the Bank’s Quantitative Easing programme designed to support demand and lending in the UK economy. She emphasises the importance of gradually withdrawing the QE programme and she argues that the main effect of QE so far has been to hold down the interest rate on government debt (gilts) but that there is little evidence so far that QE has enabled a rise in lending to consumers and small businesses. The Indy’s Big Question looks at QE in their edition today.
read more...»Stimulating Times
I was drawn to this very interesting graphic from the latest IMF report on the state of government (fiscal) finances in countries around the world.
read more...»Guardian’s World Economic Cycle Guide
This is a fascinating time for keeping up to speed with where regions and countries are in their business cycles. The UK seems to be one of the laggards - Stephanie Flanders explores some of the reasons here - whereas the USA is tentatively starting a recovery. And demand and output in many emerging market economies remains strong. Click here for the Guardian’s interactive guide to the world economic cycle.
230 million unemployed worldwide - the economic and social fallout
I was listening to BBC Business World today and came across this revealing and thoughtful interview on the global impact of the huge rise in joblessness. According to the UN’s International Labour Organisation, there are upwards of 230 million unemployed people on this planet, around seven per cent of the workforce. This is a figure set to rise sharply despite an upturn in the global economic cycle - for as we know, unemployment is a lagging indicator. It tends to turn around with a delay after demand and production has started to rise again.
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Warning - Businesses at Risk from Economic Recovery
An excellent recent article in the ACCA magazine examines an interesting phenomenon - more businesses collapse at the beginning of a recovery than during the depths of a recession. Its all to do with working capital…
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Global food prices and the terms of trade
Agflation refers to a sustained increase in the general price of foodstuffs and in recent years we have become accustomed to seeing the prices of many basic staple products rising. The era of cheap food looks to be over for now on the back of significant demand-side factors, not least rising population levels, higher per capita incomes and speculative demand for foods as prices have become more volatile. Supply-side factors are also important in explaining strong inflation in food prices. Both sides of the market are discussed by Ambrose Evans-Pritchard in his column in the Telegraph today “Food will never be so cheap again” - plenty of applied microeconomics here in addition to the huge number of macroeconomic issues that the trend rise in food prices has caused. One of the big changes in a switch in the terms of trade away from food importers towards food exporters. But do higher food prices necessarily cause agricultural supply to expand?
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13% fall in household wealth will shape any 2010 rebound
One key reason to expect a more subdued recovery from the downturn is that the household sector in the UK has suffered a huge negative wealth effect over the last couple of years. Asset values have fallen but outstanding debts have not and it is this imbalance that will shape the nature of any rebound in consumer demand for goods and services even though the cost of borrowing is at unusually low levels. The National Institute has done some research on the negative shift in personal sector wealth and it is reported in this article in the Telegraph.
Soaring cocoa prices as supply fails to keep pace with demand
There is an excellent article in the Times today about the surge in the world price of cocoa. Cocoa prices have hit a 30-year high as poor weather threatens to drive the price of chocolate up again for Western consumers. Cocoa has reached $3,412 a tonne in New York as concerns deepened about demand outstripping supply for the first time since 1968. This is a really good article to use to consolidate students’ understanding of how shifts in supply and demand can lead to price volatility. And also the importance of price elasticity of demand and supply in shaping price changes.
“The surge in price also indicates that cocoa is increasingly being used for financial investment rather than merely sold to industry”
* What factors are limiting cocoa supply?
* Why is demand from western economies rising - even though many are still in recession?
* Will cocoa farmersd necessarily gain from higher world prices?
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China’s growth starts to climb back above the 8% target
China’s leaders have set ambitious targets for economic growth - with an aim of reaching 8% growth of real GDP in 2009, a year in which world trade has shrunk and much of the developed world has been mired in recession. An enormous stimulus programme seems to be having an effect with the latest data showing a pick up in output and annualised growth of GDP climbing above 8.5%. Exports remain weak and many Chinese manufacturers are finding that the prices they are able to get from advanced economy importers continues to fall - the terms of trade have moved against them. Lifting domestic demand has become a key macroeconomic objective for the Chinese government. China has poured £354billion into spending on infrastructure in order to boost its domestic economy as exports have suffered.
This BBC news video reports on the latest Chinese growth figures.
See also
BBC: China economic growth accelerates
The Times: The dragon roars again after new figures put China’s output on a growth hat-trick
Broadband and economic development
Access to and the speed and reliability of broadband infrastructure is one of the key institutional factors that impact on economic development. The lack of an affordable and cost-effective broadband network can be a huge barrier to economic growth especially in an age where companies in many rich countries are looking to outsource their back office and call centre services to countries where operating costs are lowest. The 2009 UNCTAD Information Economy Report provides a wealth of background information on the global digital divide.
According to the latest report, businesses and consumers are 200 times more likely to have access to broadband in developed countries than in the poorest Least Developed Countries (LDCs). And the monthly cost of broadband access varies to an incredible degree - from over $1,300 a month in Burkina Faso, the Central African Republic to less than $13 in Egypt.
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