Google Wave: Trade deficits and surpluses
We were back on Wave last night considering some of the wider arguments surrounding persistent trade imbalances. Are trade imbalances a problem?
We are hoping that - as more Economics teachers migrate to Google Wave - we will be able to schedule collaborative sessions (typically lasting between 45 to 60 minutes) where we can generate ideas, arguments and perspectives in real time and support eachother’s teaching on chosen topics or issues.
read more...»Rated: 
(5/5), based on 2 reviews
Reasons to expect a Nike Swoosh recovery
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.
Rated: (5/5), based on 1 review
Gold price brings prospectors to the Highlands
The high price of gold, reported by Geoff yesterday, is giving a clear signal to a mining company in the Highlands of Scotland that it should start production from a gold mine that was first drilled 20 years ago, but has never been commercially worked because the price of gold did not provide enough incentive to the producers. However with the price of gold now at $1100 per ounce, mining operations could become profitable. Scotgold owns the Coronish mine near Tyndrum, a small village which is en route to Glen Coe, Fort William and Skye. Next month it will apply for planning permission begin mining operations in 2010 and this report from The Guardian says that Cononish is expected to start producing 200kg of gold a year at the mine site when full-scale mining begins in 2011 – enough to produce 30,000 wedding rings a year – and another 500kg each year by sending rocks for processing elsewhere.
Rated: (5/5), based on 1 review
GlaxoSmithKline and Pfizer choose to collaborate on HIV drugs
Here is an excellent highly relevant article on cooperative behaviour between oligopolistic giants. Two of the world’s biggest drugs companies GlaxoSmithKline and Pfizer have announced a plan to merge their HIV treatments in a joint venture. ViiV Healthcare is an attempt for both companies to limit the risks of costly races to find new profitable treatments for HIV/aids and give them an opportunity to counter the loss of the revenues as these companies lose patent protection and are open to competition from generic drug makers. It is a strong reminder of the very high fixed costs of research into new drugs; the long lead times between new drug development, testing and finally getting it to the market. And also the impact of the entry of generic drugs into markets once patent protection runs out. The new company has a 19% share of the global drugs market, in comparison to the Californian company Gilead’s 31%.
Drug firms’ collaboration pools HIV treatments (Independent)
IPO of HIV business is ‘up to shareholders’ (Telegraph)
Navigating our Global Future - Ian Goldin at TED
Ian Goldin speaking at the TED conference in Oxford in 2009. A short but deeply interesting talk about globalisation and some of the systemic risks and systemic shocks that are likely to become more virulent.
read more...»Sugar prices and production and investment incentives
World sugar prices are close to a 30 year high with values on the Chicago mercantile exchange hovering just under $30c per pound. For countries whose sugar exports account for a large proportion of their export earnings, the steep increase in world prices has brought about an improvement in their terms of trade and - because demand for many foodstuffs is price inelastic, a favourable change in their balance of trade. A good example of this is the African country of Mozambique, a nation almost destroyed by a long running civil war that eventually ended in the early 1990s but which has also been hit in recent years by severes drought hit many central and southern parts of the country, including previously flood-stricken areas. And where half of the population must survive on less than $1 a day.
read more...»Rated: 
(4/5), based on 8 reviews
The Fiscal Crisis - Borrow Long - If You Can!
This is a related post to my recent blog on the scale of government borrowing and debt. The Debt Management Office is responsible for finding buyers for the new debt issued by the UK government and they have their hands full this year with the challenge of selling over £220bn worth of new securities. Edmund Conway has a fascinating blog piece here about the term structure of this debt and what is means for the cost of making the interest payments. This week the UK government issued new bonds that will not be due for repayment until 2060 when most of us will be long gone! A fifty year bond is perhaps the longest bond (gilt) to have been issued for many years. And it turns out that the average date to maturity for UK public sector debt is significantly higher than for most advanced economies.
“The UK’s debt market is peculiar. In the US, average length of the existing Treasury bonds was, at recent count, 4.7 years and falling. Because this is such a short maturity, it means the debt has to be rolled over far more often, and at every point the government runs the risk of setting in stone any changes in interest rates. In France, the average maturity is 7.1 years, in Italy 6.9 years, in Germany 6.35 and in Japan 5.7 years. In Britain, the weighted average maturity of government bonds is a whopping 14.2 years. Admittedly, as the IMF points out this is slightly lower in the wake of the crisis, but it is still significantly longer than any other major economy.”
Public debt and intergenerational equity
With government borrowing set to rise above £175bn this year and total public sector debt already approaching 60% of GDP and set to surge much higher in the coming years, attention is now focusing on who will pay for this almost total collapse of fiscal discipline. There truly is no such thing as a free lunch - next year the costs of servicing the national debt will be over £60m a day.
The latest National Institute report makes for somber reading. They project that an economic recovery built around exports may do little to reduce the size of government borrowing and escalating debt and that a structural budget deficit in excess of 6% of GDP is likely to persist. Ray Barrell’s quote in this article in the Times is a classic example of the problem of inter-generational equity:
read more...»
EU warns that UK’s Black Hole is unsustainable
The European Commission has just published its latest Sustainability Report that looks at the state of the government finances of member nations. And the warning is pretty clear - without strong corrective action the UK runs the risk of public sector debt becoming unsustainable
read more...»Wall Street Partnerships and Principal Agent Problem
John Gapper has a super blog over at the FT in which he discusses the benefits that might flow from reforming bankers’ pay and restoring the partnership approach to renumeration
“Mr Thain correctly pointed out during the session that the old partnership structure of Wall Street firms, under which partners’ capital was at risk until they retired, produced better incentives in terms of risk management than bonuses based on short-term performance...This is not a bad idea but it might be extended. Why not truly replicate the partnership structure by applying those conditions to everyone who reached “partner” level - senior managing director or the equivalent at a large investment bank?”
This ties in with the idea of changing the behaviour of senior management so that they give great weight to the risks of particular investment and lending strategies and tries to avoid the myopic decision making that has proved so costly before the financial crisis.
The partnership model has applied particularly successfully in the UK with the continued success of the John Lewis Partnership. In March 2009 despite the effects of the retail recession, John Lewis announced that The company it would pay out total bonuses of £125.5m. That is the equivalent to about 13% of salary, or seven weeks’ pay.
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, saving, google, keynes, wealth, opec, depression, moodle, depreciation, jobs, competitiveness, credit crunch, economic cycle, cars, externalities, stocks, infrastructure, environmental, strategy, tim harford, carbon, vle, monopoly, subsidy, evaluation, eu, management, losses, protectionism, inequality, spare capacity, 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, agflation, cpi, farming, newsnight, choices, regulation, survey, taxes, government failure, itunes, minimum wage, lse, climate change, paul mason, population, intervention, aviation, keynes society, amazon, fiscal stimulus, single market, pricing, dan ariely, cartel, nationalisation, pollution, eton college, interest rates, shareholder, london, rationality, market failure, redundancies, rpi, mpc, shipping, behavioural economics, germany, robert peston, india, reputation, rsa, currency, quantitative easing, facebook, income elasticity, current account, stakeholders, brazil, coffee, savings, microsoft, monetary policy, crowding out, barriers to entry, collapse, multiplier effect, suppliers, economies of scale, price discrimination, uk economy, development, quiz, apple, surplus, taxation, labour market, tesco, free, scrappage, behaviour, tragedy of the commons, opportunity cost, open source, vat, smoking, cost of living, poverty trap, merger, growth, speculation, edinburgh, ownership, discrimination, cost benefit analysis, northern rock, global, ireland, supply chain, oecd, shareholders, scarcity, balance of payments, petrol, liquidity, duopoly, etonomics, iphone, starbucks, trade deficit, happiness, budget, human capital, subsidies, capital, immigration, eurozone, takeover, ecb, paradox of thrift, exploitation, advertising, wiki, public sector, utility, wants, labour force survey, peter day, tax, brand, blog, poland, iceland, foreign exchange, recovery, indirect tax, european union, robert frank, roger bootle, ocr economics, heathrow, hbos, hotels, freight, creative destruction, federal reserve, kaletsky, price war, information failure, spain, crude oil, transport, government borrowing, gini coefficient, sony, leverage, migrants, us economy, animal spirits, fishing, stephanie flanders, waste, information, milk, eu enlargement, anchoring, obama, aggregate demand, entrepreneurship society, needs, forecast, internet, discounting, real income, copper, deficit, nissan, contestability, evan davis, companies, geoff riley, fairness, 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, corus, national debt, devaluation, consumer surplus, vacancies, sub-prime, tariff, global economy, price capping, joint venture, twitter, accelerator effect, startups, guardian, yuan, youth unemployment, immobility, edmund conway, edexcel economics, tata, redundancy, walmart, relative poverty, sentiment, coal, tickets, vehicles, cash, diesel, base rate, russia, movies, liquidity trap, contestable market, marginal cost, external shocks, income elasticity of demand, libor, broadband, fixed costs, comparative advantage, accelerator, allocative efficiency, training, economic efficiency, pensions, trend growth, king of shaves, satisficing, hot money, undercover economist, positional goods, congestion, price mechanism, deleveraging, hyperinflation, migration, jobless, social entrepreneur, apprenticeships, age structure, cyclical, chris coleridge, monopoly power, financial times, wheat, mervyn king, ucas, pay cuts, reserve currency, ryanair, aldi, law of unintended consequences, carbon tax, gillette, deindustrialisation, yahoo, organic growth, barclays, price volatility, derived demand, liberalisation, house prices, richard thaler, royal mail, markets, diseconomies of scale, veblen goods, paul krugman, schumpeter, pension, demography, structural, logging, green revolution, tax burden, savings ratio, job losses, ocr, the economist, nhs, biofuel, drugs, gold, nelson thornes, scotland, cross elasticity, brics, redistribution, footfall, british airways, research, producer welfare, ebea, income distribution, social costs, ft, enterprise, general motors, natural monopoly, tariffs, o2, deforestation, economic welfare, bonds, asda, will king, automatic stabilisers, landfill, economax, energy, long tail, jim o'neill, disincentives, slump, resources, profit margin, podcast, share prices, external shock, philip allan, hedge fund, students, fiscal drag, hysteresis, ftse, elasticity of supply, buy to let, logic of life, contraction, equity, market structure, global business, oil prices, market power, health, ben bernanke, hedging, enlargement, retailing, supply-side, declan curry, nokia, price fixing, chris anderson, bric economies, diane coyle, dynamic efficiency, zimbabwe, stimulus, hamish mcrae, toyota, john kay, fiscal policy, winners curse, compound interest, contestable markets, frictional, rory cellan-jones, status races, claimant count, green shoots, repossession, eastern europe, healthcare, royal economic society, sustainability, public good, credit, gnp, superfreakonomics, vertical integration, inflationary pressure, invention, accession countries, probability, sustainable growth, business cycle, fairtrade, freemium, g20, affordability,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
