The Euro was introduced in 1999. Criticisms of the Euro Project Include A fixed exchange rate can cause an imbalanced economy. Some countries in the Euro have become uncompetitive because of higher inflation. But, there is no devaluation to restore competitiveness. This has led to high current account deficits, low growth and high unemployment. No …
Flight From Money is a situation where people in an economy lose faith in paper money and resort to barter or saving in the form of assets like gold or silver. Flight from money can occur during periods of hyperinflation. Hyperinflation is a situation where the inflation rate becomes very high. This means the value …
Readers Question: What do people mean by countries/society/financial implosion? Financial implosion implies a serious financial crisis where a country experiences a severe economic and financial crisis. The concept of implosion suggests that a crisis in one part of the economy would have a knock on effects to other parts as well – leading to a …
Readers Question. Can you explain why the Government and Economic Commentators are talking about a multiplier (in relation to budget cuts) of between 0.5 and 1, whereas I always thought that the GDP multiplier was bigger than this. Just to summarise a multiplier of 0.5 would mean fiscal consolidation (spending cuts) of £1bn, would lead …
Readers Question: Why is it, that some countries e.g USA, UK, Japan etc can electronically create money whereas India, Germany, Euro etc have to work, trade and manufacture exports and growth to keep pace with the above mentioned ? Any country could electronically create money if they wanted to. To summarise, the only good time …
One feature of the current economic malaise is that growth predictions for the UK economy have been consistently over-optimistic. For example, the Office for Budget Responsibility originally forecast economic growth of 5.7% between 2010 to mid 2012. The economy failed to meet this target, growing by just 0.9% during this period. To be fair to …
The fiscal multiplier looks at how much an initial change in injections affects real GDP. For example, if increased government spending of £1bn causes overall GDP to rise by £1.5bn, the multiplier effect is 1.5 If £1bn worth of tax rises causes real GDP to fall by £0.5bn, the multiplier effect is (0.5) Since 2009, …
Readers Question: What would happen if a major currency, such as the dollar gets backed by gold again? If a major currency was backed by gold it means the government must hold sufficient gold to convert representative money into gold at the promised exchange rate. It means that the country would not be able to increase the money …