Are falling oil prices good for the economy?

Are falling oil prices good for the economy?

In recent months, we have seen a dramatic drop in oil prices. For many consumers and business this fall in the price of oil will be welcome reduction in the cost of living and a reduction in the cost of business. However, is such a steep fall in oil prices good for the economy? Benefits of falling oil prices In normal economic circumstances, a fall in the oil price can help the economy. Lower oil prices reduce cost of transport and…

Why did printing dollars not cause a fall in value of the dollar?

Why did printing dollars not cause a fall in value of the dollar?

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). How do you explain this? It is true that since 2007, the Fed has increased the money supply, but there has been no collapse in the dollar, and inflation has stayed very low. You might expect…

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A note on email delivery

For those who like to follow economics help by email delivery, a note to say I have switched over from Google Feedburner to Mail Chimp. It will not make much difference to readers, but Mail Chimp will be higher quality and more reliable than the ‘free’ feedburner service. Since Google acquired Feedburner, they have put little effort into it and many don’t trust Google to even continue it. Feedburner were supposed to send every blog posts, but it became buggy and didn’t work properly. The old lesson if something is free, you…

Looking back at the great recession

Looking back at the great recession

I found this old video I made in 2008 about Keynesian economics. It’s OK for a basic introduction to some elements of Keynesian economics. 2008 was a pivotal year for economics because it marked a sharp break from much of the post-war economic cycles. 2008 broke the long-period of economic expansion, with growth falling below the long-run trend rate. By March 2009, interest rates fell to 0.5% and seven years later, they are still at record lows. It has challenged many assumptions of political economy. Apart from the sock of seeing…

UK Economy 2016

UK Economy 2016

The UK economy in 2016 is emerging from a long period of economic stagnation and the recession of 2008-12, and has some positive signals of growth, low inflation and falling unemployment. However, the UK chancellor has been giving mixed signals. On the one hand he has pointed out that UK has one of the strongest rates of economic growth in the developed world. On the other hand, he is also keen to lower expectations pointing to the many potential pitfalls to future economic growth.

UK Inflation Rate and Graphs

UK Inflation Rate and Graphs

Current UK Inflation Rate CPI inflation rate:  0.1% (headline rate) CPI – D7G7 at ONS (page updated 10 Jan, 2016) Source: Raw data General inflation tables | CPI annual % change D7G7 at ONS Other measures of inflation RPI = 1.1% Nov 2015 (RPI index CZBH) RPIX =1.1% (RPIX – CDKQ) CPIH = 0.4% (CPIH – L550) Updated 10th Jan, 2016 See: Measures of inflation What is causing low inflation? Lower cost push inflation – falling oil prices. Other commodity prices also falling,…

UK Budget Deficit

UK Budget Deficit

The budget deficit is the annual amount the government has to borrow to meet the shortfall between current receipts (tax) and government spending. (Forecast for UK 2013/14 is £105bn or 6.5% of GDP) National debt or public sector net debt –  is the total amount the government owes. This is accumulated over many years. See: UK national debt (currently £1,400 bn – 77% of GDP) UK Borrowing Budget deficit – annual borrowing This is the amount the government has to borrow per year. In 2013/14 net borrowing is forecast at £98.5bn or 5.7%…

UK debt held by foreign investors

One of the most common questions asked is, who owns UK National Debt? Often  people assume that UK government debt is owned by foreign investors. However, foreign investors only hold about 25-30% of UK government debt. The rest is held by the UK private sector (pension funds, insurance companies e.t.c). Recently, the Bank of England has also been purchasing Gilts under the Asset Purchase Scheme. In the past few years, the proportion of UK government debt held by overseas investors has been about 30%. A different, but similar, concept is