Readers Comment (Ralph Musgrave) from Why is Chinese Yuan undervalued You claim “Chinese growth is dependent on exports” (2nd bullet point). You then argue that a lot of labour is quitting agriculture and state industries. Plus this labour needs jobs, therefore an undervalued currency and a healthy export sector is helpful in creating such jobs. …
A key element of UK competition policy is that any merger which leads to the creation of a firm with more than 25% of market share will automatically get referred to the competition commission. The competition commission will then evaluate whether the merger is in the public interest. However, the due to exceptional circumstances, the …
Many argue that on simple purchasing power parity, the Chinese currency the Renminbi is undervalued by approximately 30%. This is a source of friction in the US, with firms claiming they lose out to a cheap Chinese currency which can undercut US goods. The Chinese government wish to keep the currency undervalued because: A weaker …
Readers Comment What is so infuriating is that Gordon Brown chose to give the banks huge sums of money to help lubricate the economy, only to forget to put in a clause compelling them to lend it! (from: Why are banks not lending?) It is a difficult issue. Part of the problem in the run …
Definition of Efficient Market Hypothesis It is the idea that the price of stocks and financial securities reflects all available information about them. If new information about a company becomes available, the price will quickly change to reflect this. Three Types of Efficient market hypothesis Weak EMH. This states all past market prices and data …
Why do people gamble on the lottery but insure their car? When you gamble, in the long run, you lose money. Let us say, the payouts are 50% of the amount you pay in. Therefore, gambling in the long term makes no rational economic sense. Over time, the odds will even out and you will …
Readers Question How do you explain the long boom in house prices from the late 1990s? There were several reasons for the long boom in house prices between 1994 and 2007. Low Interest rates. In the early 1990s, UK interest rates reached 15% and were in double figures for several months. After the 1991 recession …
Readers Question: Why does the federal reserve buy treasuries? Isn’t that just taking money from one pocket and putting it in another? There are a few reasons the Federal Reserve is buying treasuries. With recession and falling velocity of circulation, the Money supply adjusted for velocity of circulation is showing deflation. Therefore buying Treasures and …