Most western economies are facing the prospect of record peace time government debt levels. The EU Maastrict Criteria stated that the maximum budget deficit member countries could run is a budget deficit of 3% of GDP. (By the way, I am glad this target for government borrowing has not been enforced. That would have been …
An interesting graph showing relationship between the output gap and levels of government borrowing. A negative output gap indicates GDP is below full capacity and there is unemployed resources. Therefore, in a deep recession, like 2009, the output gap will rise. In a boom, we will have a positive output gap as firms struggle to …
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 …
Ignoring the relative merits of claiming £20,000 of taxpayers money for help in cleaning an MP’s moat ( or the 48p for a packet of crisps or £10 for your husband to watch a blue movie) does it make sense to pay MPs more? Firstly, How Much do MP’s Earn? The official salary is £64,766. …
On Saturday morning I was returning to the UK from JFK via American Airlines. For some reason the flight was in chaos. American Airlines had managed to overbook the flight by 37 people. There were 37 angry people who had bought a ticket but not having a seat. The previous night a flight had been …
Readers Question: Why might the public ignore future tax liabilities when making spending decisions? A tax liability is a tax bill that you will have to pay the government in the future. In theory, if you have a large tax liability in the future, you will reduce current consumption to be able to pay the …
Readers Question: Greece has a current account deficit of almost 14% (!) of GDP and Greece is a member of the EU. How can it resolve the problem if it cannot devalue the currency ( the quick way out, which was used in the past when the greek drachma was around) and when productivity is …
It is difficult to predict the dollar because there are few different factors pulling the dollar in different directions. Firstly, the dollar has been surprisingly resilient since the US slipped into its worst recession and US interest rates tumbled to near 0%. The resilience of the dollar is not based on economic fundamentals but, a …