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...»Kindling a desire for e-books
I am eagerly awaiting the arrival of a Kindle - it may have to wait for my return to Hong Kong where I am spending some of the half term delivering some presentations to students and teachers (more on this when I get there). Rory Cellan Jones from the BBC has been road-testing the Kindle and is very enthusiastic. Diane Coyle can see some of the benefits but is more sceptical and like many of us doesn’t want to be surrounded by empty bookshelves. I will be taking two hard backs with me on the flight. Roger Bootle’s new book The Trouble with Markets and the much-hyped SuperFreakonomics by Steve Levitt and Stephen Dubner reviewed here by Tim Harford.
The falling pound - a bitter sweet development
Ordinarily a depreciation in the exchange rate ought to provide a welcome boost to the competitiveness of UK industries exposed to international trade - providing a useful cushion of extra demand at a time of economic weakness. But Roger Bootle’s analysis in his latest Deloitte Economic Review provides a timely and really useful piece of work for A2 students wanting to deepen their understanding of the impact of a lower exchange rate on output, trade, inflationary pressures, profits and jobs.
Bootle argues the the lower pound will help to re-balance the economy - but depreciation has come at an earlier stage of the economic slowdown than that seen in 1992, which came after a major recession. Accordingly, the inflationary dangers of a weaker exchange rate might appear to be greater this time - one of the reasons why the Monetary Policy Committee appears reluctant to cut interest rates.
Download the excellent Deloitte Review here.
Businesses hold the key to the next stage of the cycle
These are turbluent times for the economy - but the macroeconomic numbers of output, investment, jobs and pay are simply the aggegate of many thousands of decisions taken by individual businesses across the length nd breadth of the economy. How the UK economy emerges in the current downturn will depend crucially on the strategies adopted by the busines sector. It is a huge challenge - to make money and protect margins in a time when cost pressures are enormous, when demand might be slipping away and productivity growth is slowing down as capacity utilisation drops.
Does a current account deficit matter?
Yes according to economist Roger Bootle writing in the latest edition of the Deloitte Economic Review and reported in this article from the Financial Times.
“Britain is headed for its highest peacetime current account deficit and both household and government spending will have to slow painfully to correct it, according to economist Roger Bootle”
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