The power of words…
Some say that “words have meaning and names have power”. Well when Mervyn King speaks, markets listen. And sell the pound too.
Rated: 
(5/5), based on 2 reviews
Size of UK GDP overtaken by Italy
Edmund Conway reports in the Telegraph that the impact of the recession and the depreciation of sterling against the Euro has caused Italy to overtake the UK in terms of size of economy.
The BBC web site has a useful short article on GDP and its measurement
Rated: (5/5), based on 1 review
Let a falling pound rebalance the economy
Stephen King has a superb article on the importance of exports and a cheaper currency to prospects of recovery in today’s Independent.
“If consumer spending, government spending and investment spending are going to be weak, the only likely source of growth is exports. One way to boost exports is to adjust the relative price of goods and services produced in Britain, and an obvious way of doing this is to encourage sterling to fall. Unlike the individual eurozone members, the UK still enjoys exchange-rate flexibility.”
But he makes the point that a lower currency on its own provides little more than a quick palliative to the fragily economic situation - the UK needs to reinforce our competitive advantage in many different industries by improving non-price quality, keeping costs under control and investing in productive capacity rather than simply relying on a weaker sterling to boost the profitability of exports.
Cause and effect of the weakness of sterling
I do recommend this 4-minute interview to help explore the reasons for the weakness of sterling and whether it is helping the UK economy. Mark Thompson , a dealer at Moneycorp, was interviewed on Radio 5’s ‘Breakfast’ programme, and explained the shocks to the economy caused by the use of Quantitative Easing and the negative bank deposit rate (which means that if banks choose to hold money on deposit with the Bank of England it actually costs them money, rather than gaining them a return as interest). He sees these as strong statements that had been deliberately used to depress the value of the pound on the currency markets, thus encouraging exports and raising the price of imports, so that there is a substitution effect towards home-produced goods, which we can see is reducing the negative trade balance and so helping to raise the level of AD.
The link here will take you to the Friday 25th September episode of the programme, and should remain live until the end of this week; I think that after that it will be unavailable. Once you have opened the i-player page, use the scroll bar below the ‘control panel’ to move forward through the programme to 1 hour 48 minutes, which is the start of the interview.
Sunday Selection
Here is a selection of recommended web articles and features
Robert Peston asks whether a slower recovery will be better for the UK than a rapid rebound from the trough of the cycle:
Nobel-Prize winning Economist Joseph Stiglitz considers the pitfalls of relying heavily on GDP as a measure of economic well-being and sustainability - “Chasing GDP growth results in lower living standards. Better indicators are needed to capture well-being and sustainability.”
Over at the Independent, Hamish McRae argues that the future of the British motor industry depends on creative and highly skilled designers rather than hanging on to the desire to keep mass manufacturing going at any cost
“There is no room for sentiment in the motor business. It is a really tough one and one that in the developed world will continue to be in slow decline. The world’s largest car producer now is China and that is the way the world will continue to go. There is room for a country like the UK in niches – of which the Mini is perhaps the best example and MG might have been – at the top end of the market where craft and design outweigh the cost of manufacturing in the developed world, and as a sterling base supplying the UK market.”
What is economics? Modern approaches
This looks like a very useful resource for ambitious A2 economists - a New Scientist special on Economics from earlier on this year
Sterling and the Economic Recovery
Despite a recent appreciation against the US dollar and the Euro, sterling remains well below its value of two years ago. But has the weakness of the pound - which has given the British economy a competitive boost at a time of recession - delivered the extra impetus for demand that we have been searching for? Edmund Conway considers this in his column in the Telegraph today - Weak pound might not be enough to rescue UK economy -
read more...»Developments in Currency Markets
Here is our latest streamed presentation on key movements in foreign exchange markets. The presentation covers:
Sterling Trade-weighted Index
Sterling US Dollar Rate
Sterling US Dollar and Interest Rates
Euro Sterling Exchange Rate
Euro Sterling and Interest Rates
Sterling and CPI Inflation
Sterling and Monthly Trade Balance in Goods
Chinese Yuan against the US Dollar
Russian Rouble against the US Dollar
Euro against the US Dollar
Pegging to the Euro – Latvia and Estonia
Recession and cheaper pound help to cut UK trade deficit
The recession is contributing to an improvement in the UK’s monthly trade balance according to new figures released by the Statistics Commission. Britain’s trade in goods deficit for May 2009 fell to the lowest level in three years mainly as a result of a fall in consumer demand for imported goods.
The depreciation of sterling has also helped but the downturn in global trade has meant that a more competitive exchange rate has yet to really show through in higher export volumes. Many of the UK’s main trading partners remain stuck in recession.
The UK trade figures were also boosted by the first oil surplus since September as oil refineries cut their imports of oil in a bid to reduce stocks.
It is perfectly normal for a trade deficit to reduce in size during a downturn since the UK has a high income elasticity of demand for imported goods and services. But don’t expect the deficit to disappear since many of the underlying causes of the gap between exports and imports are structural rather than cyclical.
Europe Revision: The Euro
Revision notes on aspects of the EU single currency - is the UK economy better off outside of the Euro?
read more...»Rated: (5/5), based on 1 review
Cable Strengthens
This is not a reference to the growing political influence of the Lib Dem economics spokesman, a possible front runner to be the next Speaker of the House of Commons. Instead, it refers to another influential cable - the pound-dollar exchange rate. The pound rose 0.9 per cent today against the dollar to $1.5476, levels last reached in late December.
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
