Readers Question: Can you explain the short-term and long-term effects of Osborne legislating that there must be budget surpluses in any year when growth exceeds 1%, which is almost every year, whilst we have a rather large current account deficit. What will be the effects of this on private sector companies, public investment, households, the …
Readers Question: How can a developing country grow without inflation? Economic growth can lead to inflation, for example, if demand rises faster than productive capacity, then we will see rising prices. However, economic growth is compatible with low inflation, and developing economies which can increase productive capacity and general efficiency can see rising living standards …
Readers Question: Economic theory says that when Quantity (Q.S) increases Price (P) should ordinarily fall. After the 2007 crisis in the USA, the FED pumped billions of Dollars into the economy through QE. However the price of dollars, interest rate has not only fallen lower, but is closer to zero as of today ( 2016). …
Readers Question: After the insightful post on ‘Italian Economic Decline’, I was particularly captured by the % debt to GDP line graph of the different developed countries. The one thing that really caught my eye was Japan’s huge % debt to GDP and yet their government bond yields are consistently declining. Aren’t the markets worried …
The London housing market is one of the most expensive places in the world. In Sept, 2015, the average London house price is now just under £500,000 (BBC) Since 2013, house prices in London have risen 40%, defying a weak economy and stagnant growth in average earnings. London house prices are 7% higher than the …
A chain-weighted inflation measure takes into account changes in both price and spending patterns. A chain-weighted inflation index measures both changes in the price of goods but also reflects changes in the number of goods bought. For example, suppose you buy two goods which are close substitutes – bananas (30p) and apples (30p) At this …
The ONS produce an RPI pensioner index which is the inflation rate calculated for the spending patterns of the average pensioner. The series is here: RPI Pensioner index CZIT – Percentage change over 12 months: One-person pensioner households index. CZJI – Percentage change over 12 months – Two-person pensioner households index Why do pensioners have …
Readers question: Does the government determine the interest rate for their bonds? The government finances its debt by selling bonds on the open market. (in the UK they are termed gilts) In the UK, government debt is managed by the UK Debt Management Office DMO. They sell gilts on behalf of the government. Initially, they …