Do we need a fiscal stimulus?
Firstly, it could be argued that it is unnecessary as the economy already has had a significant stimulus from the reduction in interest rates and the depreciation of the pound as Anatole Kaletsky argued in The Times last Monday.
Sterling is now about the same value as it was as we came out of recession in the 1990s, a level which encouraged exports and did not lead to inflation because demand was subdued. I appreciate that the boost to exports may not be that great at the moment because of the recession elsewhere.
As far as interest rates go, there is still room for base rates to fall and even more room for a decline in the London Interbank Offer Rate.
Latte Lesson (1)
As we near half term I like to take a break from the classroom and have a latte lesson - where the Economics department provides the Fair Trade tea and coffee and elevenses whilst students arrive at the coffee bar armed with their own selection of interesting articles gleaned from the media over the last seven days. There are only two rules! One that students must talk about their articles rather than read them out! And secondly that nobody goes near a copy of the Daily Mail.
I really enjoyed the first latte lesson of the day - here is a snapshot of the issues discussed together with some links to the source material:
read more...»BAA faces break up after Competition probe
Michael O’Leary, CEO of Ryanair has called it the ‘best decision in the history of aviation ever.’ Colin Matthews, Chief Executive of BAA has slammed it as ‘flawed’. The Competition Commission has delivered a report which suggests that BAA should see three of its UK airports including two in London and one at either Edinburgh or Glasgow.
Oil dependency and market failure
Chancellor Alastair Darling offered us these brave words
“"If we we don’t reduce our dependence on oil ... we will continue to expose ourselves to the uncertainty of the oil market.....It is important that we reduce our dependency far more quickly than perhaps people thought was necessary.”
It is a shame that the government has wasted over eleven years in producing a credible and coherent energy policy. I was chatting to a guy on the train down to London this morning. He had over twenty-five years experience in the energy industry, much of the latter part of his career was within the nuclear sector working as a senior engineer. He made a rather pertinent point that, once we realise that moving decisively to nuclear is inevitable, we will run into major shortages of the skilled personnel needed to construct the new nuclear power stations. Most of those required have long since retired from the industry and we will be dependent on nuclear engineers from the USA and far east Asia.
Anatole Kaletsky was on good form in the Times today writing about three market failures in the oil industry
1/ The huge gap between the marginal cost of producing oil and the marginal cost of supplying oil substitutes
2/ Monopoly power in the oil business - controlling the supply of oil - “there is nothing efficient about the level of prices set by the market”
3/ The ramping up of oil prices by institutional investors and the incentives to invest in oil exploration rather than much needed investment in non-oil new technologies
The rest of Anatole’s article can be found here
Two heavyweights on the UK economy
Gavyn Davies (former Chief Economist at Goldman Sachs) and Anatole Kaletsky (Contrarian Extraordinaire) put their minds to the surge in inflation and the consequences of the transfer of wealth from UK consumers to oil and food producing nations.
read more...»Most Popular Topic Tags on the Economics Blog
recession, demand, economics, price, unemployment, prices, inflation, investment, costs, profit, downturn, supply, trade, debt, employment, confidence, euro, gdp, competition, capacity, risk, production, china, oil, incentives, exports, expectations, housing, pay, manufacturing, sterling, food, profits, property, mortgage, tutor2u, globalisation, banks, revision, slowdown, borrowing, usa, retailers, emissions, deflation, airlines, innovation, dollar, supermarkets, entrepreneur, efficiency, monopsony, elasticity, aqa, welfare, consumption, economist, productivity, keynes, saving, google, opec, wealth, depression, moodle, depreciation, jobs, credit crunch, competitiveness, economic cycle, cars, tim harford, externalities, stocks, infrastructure, environmental, strategy, carbon, vle, monopoly, subsidy, evaluation, management, eu, losses, protectionism, spare capacity, inequality, environment, poverty, bank of england, budget deficit, construction, behavioural, wages, macroeconomics, carbon trading, steel, commodities, output gap, skills, japan, oligopoly, currencies, imports, bbc, stagflation, contestable, cpi, agflation, farming, newsnight, choices, regulation, survey, taxes, government failure, itunes, minimum wage, lse, climate change, paul mason, population, intervention, keynes society, aviation, amazon, fiscal stimulus, single market, pricing, dan ariely, nationalisation, cartel, pollution, eton college, interest rates, shareholder, london, rationality, redundancies, market failure, rpi, mpc, shipping, behavioural economics, germany, robert peston, india, rsa, reputation, currency, quantitative easing, facebook, income elasticity, stakeholders, current account, brazil, coffee, savings, microsoft, monetary policy, crowding out, collapse, barriers to entry, multiplier effect, economies of scale, suppliers, price discrimination, uk economy, development, quiz, apple, surplus, taxation, tesco, free, scrappage, labour market, behaviour, tragedy of the commons, opportunity cost, open source, vat, smoking, cost of living, poverty trap, merger, growth, speculation, edinburgh, ownership, discrimination, northern rock, global, cost benefit analysis, ireland, oecd, supply chain, shareholders, scarcity, balance of payments, petrol, liquidity, duopoly, etonomics, iphone, starbucks, trade deficit, happiness, budget, human capital, capital, subsidies, immigration, eurozone, takeover, exploitation, ecb, paradox of thrift, wiki, advertising, public sector, labour force survey, peter day, utility, wants, brand, tax, poland, iceland, blog, recovery, foreign exchange, european union, indirect tax, robert frank, roger bootle, ocr economics, heathrow, hbos, hotels, freight, creative destruction, federal reserve, kaletsky, price war, information failure, crude oil, spain, gini coefficient, transport, government borrowing, leverage, sony, migrants, us economy, animal spirits, stephanie flanders, waste, information, fishing, milk, eu enlargement, anchoring, obama, entrepreneurship society, aggregate demand, needs, internet, forecast, discounting, real income, copper, deficit, contestability, nissan, evan davis, companies, fairness, geoff riley, blogging, standard of living, aqa economics, consumer welfare, martin wolf, renewable, labour mobility, collusion, imf, fair trade, pubs, income tax, obesity, res, disposable income, david smith, national debt, devaluation, consumer surplus, corus, vacancies, global economy, sub-prime, tariff, twitter, price capping, joint venture, accelerator effect, guardian, startups, youth unemployment, yuan, immobility, edexcel economics, edmund conway, redundancy, tata, walmart, relative poverty, sentiment, tickets, coal, vehicles, cash, base rate, russia, diesel, marginal cost, external shocks, movies, liquidity trap, contestable market, income elasticity of demand, libor, broadband, fixed costs, comparative advantage, accelerator, allocative efficiency, pensions, training, economic efficiency, trend growth, king of shaves, satisficing, undercover economist, hot money, price mechanism, deleveraging, positional goods, congestion, jobless, social entrepreneur, apprenticeships, hyperinflation, migration, financial times, age structure, cyclical, chris coleridge, monopoly power, pay cuts, reserve currency, ryanair, wheat, mervyn king, ucas, law of unintended consequences, carbon tax, aldi, gillette, deindustrialisation, barclays, price volatility, yahoo, organic growth, liberalisation, house prices, richard thaler, derived demand, veblen goods, paul krugman, schumpeter, royal mail, markets, diseconomies of scale, logging, green revolution, tax burden, savings ratio, pension, demography, structural, nhs, job losses, ocr, the economist, scotland, cross elasticity, brics, redistribution, biofuel, drugs, gold, nelson thornes, research, producer welfare, ebea, footfall, british airways, income distribution, social costs, ft, enterprise, natural monopoly, tariffs, general motors, o2, deforestation, economic welfare, bonds, asda, will king, automatic stabilisers, landfill, long tail, jim o'neill, disincentives, economax, energy, podcast, share prices, external shock, slump, resources, profit margin, fiscal drag, hysteresis, ftse, philip allan, hedge fund, students, buy to let, logic of life, contraction, equity, elasticity of supply, oil prices, market power, health, ben bernanke, market structure, global business, enlargement, retailing, supply-side, hedging, declan curry, nokia, chris anderson, bric economies, diane coyle, dynamic efficiency, price fixing, fiscal policy, winners curse, zimbabwe, stimulus, hamish mcrae, toyota, john kay, claimant count, green shoots, compound interest, contestable markets, frictional, rory cellan-jones, status races, healthcare, repossession, eastern europe, public good, credit, royal economic society, sustainability, invention, accession countries, probability, sustainable growth, gnp, superfreakonomics, vertical integration, inflationary pressure, business model, default behaviour, rentokil, retirement age, business cycle,All tags
ECONOMICS TEACHER RESOURCE NEWSLETTER
Join over 4,000 other Economics Teachers in the UK and around the world who receive the tutor2u Economics Resource Email newsletter. Get special offers, first news of latest resources, teaching ideas, conferences and workshops.
Recent Threads on the Economics Teacher Discussion Forums:
Posts in: General Economics Teaching
Video Case-study - lunchtime prices slashed
Long Exam Example to Use for Revision Please?
Good hotel in London for school trip
Competitive Markets
Diminishing Returns
Complementary goods - HELP Please!
URgent Help Needed
Equilibrium concept
The price of life
Extended Project Qualification
