economics

Economic predictions of Brexit

Economic predictions of Brexit

There have been numerous economic predictions springing from a possible Brexit including recession, unemployment, falling Pound, falling stock markets, collapsing house prices, inflation and the end of civilisation as we know it (I’ll leave predictions of world wars e.t.c. for someone else to grapple with). But, what is the economic theory behind these economic predictions? Recession The logic is that if the UK leaves the EU, it could plunge us into a deep recession. The IMF have warned of a ‘severe global shock’ A recession could occur due to the uncertainty of…

Tips for memorising economics and other items

Tips for memorising economics and other items

It is getting close to the summer exams, and one reader asked if I had any tips for memorising information. Some things that worked for me Read then close book. I used to read a book, then close and try to remember was is in the closed book. If I couldn’t remember, I’d check and then try again. This was hard work, but is the most effective way for getting that learning and recall. Understand and learn. Economics isn’t like learning a lot of Latin vocabulary. By comparison with other subjects there…

Solutions for declining industries

Solutions for declining industries

If a large firm / industry becomes unprofitable and appears in terminal decline, what should the government do? If the firm goes bankrupt, it will lead to the loss of thousands of jobs, and negatively affect the areas where the firm is based. See: Problems of industrial decline. This creates a strong economic and political case for the government to offer some kind of intervention to help deal with social and economic costs of large scale unemployment. The…

UK Devaluation of Sterling 1967

UK Devaluation of Sterling 1967

In 1967, the UK government of Harold Wilson devalued the Pound from $2.80 to $2.40 (a devaluation of 14%). It was a major political event because the government had tried hard to avoid a devaluation, but felt forced into the decision because of a trade deficit, a weak domestic economy and external pressures from creditors. Background to devaluation of 1967 The government pursued an exchange rate peg of £1 to $2.80. A strong Pound was seen as important for maintaining living standards and providing an incentive for manufacturers to increase productivity…

UK Economic History

UK Economic History

A look at different aspects of UK economic history, concentrating on the different decades of the Twenty and Twenty-First Century. Includes histories of particular sectors, such as housing and the coal industry. The economy of the 1920s – a legacy of war debt, deflation and life under the gold standard The economy of the 1930s – the economics of mass unemployment, but also economic recovery and growth of surburbia. Post War Economy 1940s and 1950s – Austerity, rationing, war debt, but full employment, new welfare state and…

Savings ratio UK

Definition of Household savings ratio: The percentage of disposable income that is saved. (1) Total savings = Disposable income – Household consumption UK Saving Ratio Latest UK household savings ratio: Q4 2015 = 3.8% (31 March, 2016) UK Saving ratio. Source: National income accounts Q4 NRJS dataset (more…)

Impact of a banking crisis

Impact of a banking crisis

Readers Question: Can anyone explain the reasons why the Banking Crisis may have brought about increased unemployment? A banking crisis implies major banks run short of money (liquidity). In a severe banking crisis (e.g. Great Depression 1929-32), some banks may go out of business. If banks do face liquidity shortages or worse, it will have a major impact on savers, business and consumers.  Major banking crisis invariably effect economic growth and can cause unemployment. In the recent banking crisis, banks cut back on lending. This meant firms didn’t have the…

Investment in UK – Business and Public Sector

Investment in UK – Business and Public Sector

  Total UK Business investment since 1980, slow recovery from 2009. (seasonally adjusted.) Business investment in past ten years Source: ONS NPEN From 2007 to 2010 we see a 22% fall in private sector business investment. This was the result of Banking crisis – banks didn’t want to lend Fall in consumer confidence Recession, which caused firms to hold bank from investment Recovery in business investment since 2010 From a low basis and 20% fall Helped…