austerity

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Economic impact of welfare freezes

Readers Question: What is the economic impact of proposed welfare benefit freezes proposed by Chancellor, Mr Osborne? Mr Osborne has proposed a welfare freeze, worth £3 billion of savings over two years. This benefit freeze includes Jobseeker’s Allowance, Income Support, Child Tax Credit and Working Tax Credit, Child Benefit and Employment Support Allowance (paid to those judged capable of work). It does not include pensions, disability benefits and maternity pay. The Treasury said that about 10 million households would be affected, roughly half of which are working. The freeze will raise around…

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Advice for giving an economics presentation on austerity

Readers Question: I have to visit the college I went to and give 5-10 min talk to A2 Economics students about anything economics related, preferably macro-economics.. something going on in the economy. Suggestions? Giving a presentation on economics can be a daunting thing. I often ask students (at this time of the year) to come and give their own presentation on economics. Let them be the teacher for 5 minutes. But, it’s hard work and they don’t usually enjoy it. Firstly, know your audience. A college of A2 students is good…

The UK’s weak recovery – What counts as success these days?

The UK’s weak recovery – What counts as success these days?

On the day Spain, announced its unemployment rate had increased to a truly staggering 27%, many see the UK’s anaemic growth rate of 0.3% in Q1 2013 as a ‘success’. But, it is worth noting UK real GDP is still considerably below its 2008 peak. Dataset ABMI at ONS When you look at GDP like this, the lost output and scale of the recession becomes more evident. Using a very rough rule of thumb, if we had maintained the pre-crisis trend…

Italy hopes to leave austerity behind

Italy hopes to leave austerity behind

After a rather lengthy post on evaluating EU fiscal rules, a more immediate and simple political criticism of the EU’s general austerity policies from Mr Bersani of the Italian Democrats (Pd). The new Italian political leader has argued: “We must leave the austerity cage,” “A change of course is absolutely necessary given that five years of austerity and attacks on workers have pushed up public debt levels across Europe,” he said. “The vicious circle between belt-tightening and recession is putting representative government at risk and…

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Osborne, UK Debt and Credit Ratings

I was going to write a lengthy post on George Osborne, UK debt  and Britain’s credit rating downgrade, but fortunately Simon Wren Lewis said pretty much everything I wanted to say: What George Osborne did with his austerity programme was the equivalent of putting a sick patient on a starvation diet accompanied by cold showers. The UK economy without accelerated austerity would still have been in poor shape, but under George Osborne it has been a disaster. The final verdict on George Osborne Economics at Mainly Macro Other…

Panic Driven Austerity

Panic Driven Austerity

One of the striking feature of the Eurozone crisis was how countries with relatively low levels of government debt, rushed into severe austerity. And as a consequence of this austerity saw a drop in the rate of economic growth, and an increase in their debt to GDP ratio. One of the main reasons for the rush to austerity was the rapid rise in bond yields that occurred in 2010-2011. Bond yields rose in the Eurozone because markets feared illiquidity. (temporary shortages of people to…

Is Austerity Self Defeating?

Is Austerity Self Defeating?

Question from the Economist. – It is easy to understand the case that European austerity is self-defeating. But it is also easy to see that one cannot run large deficits year after year without limit, and that some countries (Greece, Portugal) have exhausted the willingness of private investors to finance them. Is Austerity self-defeating? Austerity means efforts to reduce the budget deficit. Austerity involves higher tax and cuts in government spending. In theory,  this should reduce the budget deficit. However, austerity policies also have an impact on economic growth. Higher taxes reduce…

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Economics and Positive Thinking

If you read any number of self-improvement books, you will come across ideas such as ‘what you think, you will become’. Over, 2,500 years ago, the Buddha said: “All that we are is the result of what we have thought. The mind is everything. What we think we become.” When overused these positive thinking mantras can become a bit tiresome. But, maybe there is still some relevance to modern macroeconomics.  Not least, we have the phrase of ‘talking ourselves into a recession’. The idea that if key people in…