A report by NIESR suggests that austerity pursued by the government in 2010, needlessly led to a delayed economic recovery and could have cost the UK 5% of GDP or £1,500 per person. The austerity was unnecessary because The lower growth led to delayed rises in tax increases and Interest rates were at 0%, and …
Readers Question: Is there an inbuilt deflationary bias in the Eurozone? Note: I originally wrote this post in 2010. Unfortunately, every year there is a reason to update the post and suggest the deflationary bias in the Eurozone keeps getting stronger. Deflationary bias means that there is a tendency for economic policy to promote lower …
Greece is a very good example of the damage of austerity can do to both economies and the social fabric of a country. Firstly Greek austerity is almost unprecedented in its scope and intensity. Greece government spending and revenue Greek government spending was cut from €120 bn in 2008 to €90 bn in 2014. To …
Competitive devaluation occurs when countries seek to reduce the value of their exchange rate to make their exports cheaper and gain a competitive advantage in world trade over other countries. This may encourage other countries to respond by also devaluing their currency to maintain their own competitive advantage. If countries are making great efforts to …
Why didn’t the UK Join the Euro? Joining the Euro would give the UK various advantages: predictability of exchange rates with Europe Easier for consumers to compare prices (price transparency) Lower transaction costs Encourages investment because of greater stability in trade. However, despite these potential benefits the UK decided not to join and shows no …
Bank of England base interest rates are currently 0.5%. Economists are divided about when interest rates will rise. Some point to the evidence of a strong economic recovery to suggest interest rates could rise by mid 2015. Others argue that the strong global deflationary pressures mean that UK inflation is likely to stay very low …
What is the UK’s debt burden? Firstly, there are different types of debt to consider Government debt – See: public sector debt (often referred to as National debt) Private sector debt – indebtedness of householders, finance sector and non-financial companies. External debt – the amount we ‘owe’ to other countries In addition, you might take …
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 …