Monetary Policy and Politics

Why is monetary policy easier to conduct than fiscal policy in a highly divided national political environment? Monetary policy is usually implemented by independent monetary authorities. For example, in UK, monetary policy is implemented by the Monetary Policy Committee of the Bank of England. Therefore, they can take politically unpopular decisions such as increasing interest …

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New Zealand Interest Rates and Inflation 2008

Readers Question:  What is the relationship/theory between the OCR (Official Cash Rate) and Inflation? The Official Cash Rate is the interest rate the New Zealand Reserve Bank use to control inflation. It is very similar to the base rate used by the MPC, Bank of England. Graph Interest Rates New Zealand Because New Zealand commercial …

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Predictions for Euro vs Dollar 2009

Readers Question: WHAT ARE THE PREDICTION FOR THE DOLLAR $ AGAINST THE EURO FOR 2009? 2009, will probably see both EU and US economies enter into recession. So far, the EU has been slow to cut interest rates; it has given greater prominence to the spike in inflation rather than the slowing economy. However, the …

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Economic Growth vs Inflation: Which is more Important?

Readers Question: Low inflation but slow economic growth, if any, or GDP growth , with the risk of 2 digits inflation?  Which one is a better option,or the least harmful? The choice is not enticing. These are some point to consider: At the moment the UK economy is experiencing inflation of 5% (above the target …

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Should we worry about water running out?

Readers Question: Should we worry about water running out? In a way, water is a renewable resource. From a global perspective, water is almost infinite in supply. However, there can be serious water shortages in local areas. This is becoming an increasing problem due to population growth, climate change and rapid economic growth. Also, it …

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Indian Economy 2009

After several years of rapid growth, 2009, will prove a testing year for India. Inflation Inflation continues to pose a threat.  Inflation peaked at 12% in early August ’08. Inflation, is being caused by rapid growth (demand pull factors) but, also the cost push inflation factors (rising oil prices). Hopefully, the fall in oil prices …

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How Accurate Are Government Debt Statistics?

Readers Question: Why are future debt commitments, pensions, PFI repayments, Northern Rock, et al, not part of the National Debt? The treasury must do cash flow projections (?) to calculate how much income it needs. Don’t these factor into the calculations? It is a good question. A while back, The Institute of Fiscal studies produced …

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