Fed pledges to keep policy rates “exceptionally low”
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.
read more...»Kaletsky on the benefits of a weak pound
Anatole Kaletsky writes from Japan in today’s Times and discusses the benefits that flow from having a weaker exchange rate.
“A weak currency is something to be desired and encouraged during periods of recession, when employment output need additional stimulus. A strong currency, on the other hand, is desirable during boom periods, when economic activity needs to be restrained to prevent inflation. Right now, every big economy in the world, with the possible exception of China, needs extra stimulus — and therefore wants to have a weak currency. But that, of course, is impossible, since for every currency that weakens, another currency must go up.”
The conventional benefits are well explained in the article and there is reference to the Chairman of Komatsu who is now relieved that the UK did not join the Euro several years ago - but whose equipment can now be exported from their UK manufacturing base to the rest of the European Union at an ultra competitive price. UK financial services are also reaping the rewards of a weak sterling / dollar or euro rate since they bill their clients in dollars or euros but have a cost base in sterling (that is if they choose to remain in the UK!)
More here: Rejoice – the pound is down again
Jobless
Looking for a documentary on the impact of rising unemployment on individuals and society - a BBC documentary this week looks likely to be a really useful teaching resource. As the unemployment statistics start to climb once more, multi BAFTA winning film-maker Brian Woods goes behind the numbers to the people they represent, and presents his take on the recession. Full details here
Capitalism - A Love Story
The new Michael Moore film is due for release in the UK soon
read more...»Business in Sport - BBC Special
Spring hat tip to Ben White from Bromsgrove school for flagging up this new web resource from the BBC
The BBC now have a special feature ‘Business in Sport’ section:
Not sure whether its here to stay for long term but absolutely loads to pick up from here, including at a brief glance:
• Profit and Loss
• Sources of Finance
• Football Club Finances
• Legal /Contract and Ethical Issues
• Marketing / Sponsorship
• Impact of Recession
• Impact of World Cup on SA economy
All in a sporting context – brilliant!
A Turning Economic Cycle - Charts to Use
I was discussing turning points in the UK economic cycle with my AS macro group last week and used the following handout (in word format) to provide a few updated charts on the UK economy. I have made them available in case colleagues want to use them or build / amend them into their own worksheets and discussion handouts.
Handout
A_Turning_Economic_Cycle.docx
Rated: 
(5/5), based on 1 review
UK CEOs on their recession strategies
I am cross posting this superb blog from Jim on a new survey of CEOs and some background to their corporate tactics and strategies during the recession. Business responses to economic shocks and turning points in the trade cycle have a huge impact on the depth, severity and duration of any downturn. There is much below for students to consider when they discuss the reaction functions of senior executives to the challenges of the downturn and the financial crisis.
read more...»Rated: (5/5), based on 1 review
Margins and risk - the spiralling cost of credit
There has never been a strong link between the policy rate decisions of the Bank of England and the interest rates charged to customers who take out unsecured loans using their credit cards. But withbase rates at 0.5% and lilkely to remain well below their neutral rate for some time to come, the chasm between this and the average of 18-19 per cent annual rate on unpaid credit card balances has rarely been wider.
The lenders claim that rising debt default levels from borrowers suffering from the recession and rising unemployment has increased the risks of loans and that higher rates are the inevitable result of this.
Consumer watchdogs take a less benign view and argue that the financial companies are exploiting consumers and whacking up their profit margins even during these difficult times.
This BBC news video from Brian Milligan provides food for thought on the credit card issue and makes a good resource to use when teaching monetary policy and personal finance. The BBC Radio 4 Today programme also covered this issue during the week.
Lively articles on the fiscal stimulus debate
“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.”
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.
AS Macro: Sterling and the UK Economy
The Bank of England estimates that the pound has depreciated by around 25pc since mid-2007. And in 2008-09, sterling registered an even larger depreciation against the dollar than its 1992 exit from the European Exchange Rate Mechanism. In trade-weighted terms, the decline was the biggest since figures were first calculated in the early 1980s.
The fall in the external value of the pound has many possible consequences for an open economy such as the UK. At AS level it is important to identify these effects and explain them using an AD-AS framework. Then support your answer with some good evaluation points and (where possible) supporting evidence.
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