Interest rates, exchange rates and annual holidays

As expected, the Monetary Policy Committee of the Bank of England has cut the base rate by 0.25% today.

Policy conflict for the UK economy?

The IMF is forecasting a slowdown in global growth to 3.7% in 2008 and 2009. This is in contrast to recent growth rates of over 5%.

Contestable Markets - Online Music

When was the last time you went into a store or ordered a CD online? The BBC web site reports that iTunes has overtaken Walmart as the biggest retailer of music in the United States. Over 50 million people have used iTunes since its inception but the market for downloadable music is becoming more and more contestable as the major players line up for a share of the supernormal profits that are available. MySpace has entered into a joint venture with Universal, Sony BMG and Warner and will now compete with rivals such as Last FM (a free streaming service) eMusic and Napster. According to the new data (which covers the month of January) 48 percent of US teenagers didn’t buy a single CD in 2007, compared to 38 percent in 2006. Paid music downloads in the USA accounted for almost 30 percent of all music sold in January.

Music sales in the USA (for Jan 2008)

iTunes Store - 19 percent
Wal-Mart - 15 percent
Best Buy - 13 percent
Amazon - 6 percent

How important do you think ‘first mover advantage’ is in this market? As a dedicated iTunes user I haven’t even looked at competitor services for many months now.

Mind Map: Credit Crunch

Our A2 macro group mind-mapped the Credit Crunch in a lesson on Friday, a text summary appears below and the original map is also available as a pdf file.

Yuan’s World

Countries running gigantic trade surpluses must take some responsibility for rebalancing the world economy by raising their own domestic demand for goods and services. That was the message I took from a speech on the balance of payments given last week by John Gieve, deputy governor of the Bank of England. In a talk to the Sovereign Wealth Management Conference in London. Mr Gieve argued that stronger action is needed to correct some of the deep rooted balance of payments imbalances in the world economy and that sovereign wealth funds will have an increasing role to play by boosting investment in their domestic economies to close some of the gap between domestic savings and investment.

Some key points from his speech are given below:

US and UK inflation

Latest data on inflation suggests price rises are dampening in the US - opening the door for further rate cuts.

But in the UK there are fears that sustained inflationary pressures will prevent the Monetary Policy Committee of the Bank of England reducing the base rate until at least the summer. Geoff looked at this in detail earlier in the week.

The Decoupling Debate

The D word - ‘decoupling’ - is at the heart of the debate regarding global economic prospects for 2008 and beyond.

The term refers to the shift by developing economies - and newly industrialising countries in particular - away from dependence on strong demand in the West for their products. 

Recession Watch: American Idle

Economists in the United States pay a lot of attention to the monthly payroll numbers and the latest set of figures are being taken as a sign that recession is more or less a done deal in the USA.