economics

Automation – benefits and costs

Automation – benefits and costs

Definition of automation Automation refers to the process of automatically producing goods through the use of robots, control systems and other appliances with minimal direct human operation. Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods. A perceived downside of automation is that it leads to jobs being displaced in traditional areas of work – in particular, ’blue collar’ manufacturing jobs. Less visible is how the process of automation leads to the creation of new jobs in…

Impact of raising US interest rates on US and global economy

Impact of raising US interest rates on US and global economy

After keeping interest rates at close to zero for several years, the US Federal Reserve have moved to finally increase interest rates. This increase in interest rates is more significant than usual because it marks an end to the unique circumstance of ultra low interest rates. The Federal Reserve have also indicated they expect to raise interest rates three times throughout 2017. Basic impact of increasing interest rates. I have covered this in detail before, so I won’t repeat too much here. See: Impact of raising interest rates, but to…

Problems facing UK economy post Brexit

Problems facing UK economy post Brexit

After the UK’s decision to leave the EU, what economic problems will it face? Summary of problems Devaluation of Pound Sterling, increasing price of imported goods, such as food, oil, manufacturers and domestic inflation. Decline in capital flows as UK is seen as more risky place to invest and save. Decline in inward investment. UK is currently 3rd largest destination for inward investment in world, but this may fall when it is outside the EU. UK’s large current account deficit, which will put further downward pressure on Sterling Decline in…

Challenges of making economic forecasts

Challenges of making economic forecasts

All economic forecasts are subject to margins of error. This is because: There are many variables affecting the economy. For example, the role of shadow banking was largely ignored in 2007 forecasts, but failed sub-prime mortgage debt had a much bigger impact on the wider economy than ever before. There is always a big element of uncertainty, e.g. how will consumers react to certain events, e.g.what will happen to oil prices? It is hard to know even the actual state of the economy (delays in getting data, data incomplete) In…

Low inflation and high growth

Low inflation and high growth

Readers question: “Can an economy achieve low unemployment, low inflation and economic growth at the same time?” To achieve low unemployment, low inflation and economic growth at the same time is possible. For example, the UK economy 1993-2006 saw a prolonged period of low inflationary growth. Since early 2000, the Chinese economy has been growing at a rapid rate, with inflation staying relatively muted (with some exceptions e.g. 2008) For low inflation and high economic growth to occur, we need to see growth in aggregate demand and aggregate supply (productive capacity)….

Economic changes from railways

Economic changes from railways

I’m currently reading a book Blood, Iron and Gold by Christian Wolmar about how railways transformed the world. This interesting extract from the political economist Friedrich List, explains some of the economic benefits of railways: Railways would carry wood, turf and coal at less than half the present costs. Bavaria, where flour, meat and other foodstuffs are 50 – 100 per cent cheaper than in Leipzig, could export its surplus to the Erzgebirge, the Elbe and the Hanseatic cities. Cheaper…

Economic policies of Donald Trump

Economic policies of Donald Trump

The first admission about writing on the economic policies of Donald Trump is that nobody can be entirely sure what it will be – perhaps even Donald Trump himself. Campaign promises are one thing, but the reality of a Republican controlled Congress, may be something else. I don’t think it unreasonable to think that the reality of Congress may limit the more ‘populist policies’ of higher government spending and rising tariffs. Nevertheless Donald Trump’s economic policies are likely to involve: Tax cuts (predominantely for high-income earners and wealthy) Increase in…

What causes price fluctuations in agricultural markets?

What causes price fluctuations in agricultural markets?

Readers Question: What causes price fluctuations for the supplier in the agricultural market such as coffee/tea? Coffee tea are agricultural products. Therefore supply can be variable depending on several factors 1. Weather conditions. For example, early frost can harm supply. Good weather can lead to unexpectedly large increase in supply Also, disease and pests can affect supply. Global market In recent years, the number of countries producing coffee has increased. Traditional producers like Colombia have faced increased competition from new countries seeking to enter the market. More countries makes it harder for coffee producers to…