Inefficiencies within Greek economy

Inefficiencies within Greek economy

Over Christmas and the New Year I visited Greece – landing at Athens airport then hiring a car to Kalamata. After writing many articles on the economic troubles of Greece, it was interesting to visit in person. Whilst enjoying a holiday, I was always aware – in the back of my mind – the Greek economic crisis and I was looking for signs or anecdotal evidence of why Greece has struggled from…

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. The 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 summarise: …

Impact of falling house prices

Impact of falling house prices

A look at the economic impact of falling house prices. Readers Question: Explain why a decrease in the price of houses can lead the economy to experience a recession. In summary: falling house prices reduce consumers’ main form of wealth. This tends to cause lower spending and lower economic growth due to a negative wealth effect. Falling house prices tends to have a significant impact in the UK because of the relative importance of the housing market.

Reasons for falling wages

Reasons for falling wages

Since the financial crisis, we have seen an unprecedented stagnation / decline in real wages. This decline has been most noticeable for low income workers, with growing levels of inequality. The decline / stagnation in real wages is a global phenomena – though some countries have been more affected than others. Reasons suggested for falling wages since 2008 include: Recession – causing unemployment and downward pressure on wages Decline in trade union membership. Increased labour market flexibility, such as more zero hour contracts, new gig economy…

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…

Impact of US tariffs

Impact of US tariffs

Readers Question: I’m an American, and I have a question on tariffs. Donald Trump has said he will place a tariff on all Chinese steel, and on Mexican cars. My question is, “Are tariffs still useful, and if so, why not put tariffs on all cars from Japan, Korea, Mexico, and Germany?” A tariff on Chinese Steel is designed to help the US steel industry. At the moment, American producers may find it cheaper to import steel from China so US steel producers lose out. This has led to job…

Mobility of labour

Mobility of labour

Mobility of labour refers to how easily workers can move to different jobs within the economy. The two main factor of labour mobility are: Geographical mobility – how easy is for a worker to move between different regions and countries to seek new work. Occupational mobility – how easy is it for a worker to move from one occupation to another. We can also distinguish between an individual’s labour mobility and overall labour mobility for an economy. Personal labour mobility – each individual will have his own unique set of…

Shrinkflation

Shrinkflation

Shrinkflation occurs when firms reduce the size or quantity of a good and keep prices the same. Shrinkflation is an alternative to increasing prices, and you could argue it is a disguised form of inflation because if you wanted to buy exactly the same quantity of the good, you would have to spend relatively more. However, shrinkflation won’t show up in the consumer price index because prices stay the same. Examples of Shrinkflation In 2009 a Mars bar was reduced in…