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 …
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 …
With economic sanctions and a plummeting price of oil, the Russian economy is seeing a real economic crisis. The value of the rouble is falling – causing inflation and a decline in living standards. Government tax revenues are falling as oil tax revenues decline. On top of a falling Rouble, the economy faces recession due …
The German economy has been one of the world’s strongest economies in the post-war period. There are many aspects of the German economy which deserve praise and emulation – not least strong productivity growth, a booming export sector and prolonged low inflationary growth. In the post-war period Germany has played an important role in promoting …
The ECB inflation target is 2% – ‘it aims to maintain inflation rates below, but close to, 2% over the medium term. ‘ However, some economists argue that in the current situation, the ECB should have a higher inflation target of 3-4%. The main reason for having a higher inflation rate would be to prioritise …
Readers Question: How does inflation targeting operate when there is a deflation? and what are the problems associated with this? It’s a good question to ask at the moment, especially with regard to the ECB and Eurozone. Firstly, the EU inflation target is – below but close to 2%. If inflation falls below 2%, the …
In the recent blog – Post-war economic boom and reduction in debt, we saw how the UK successfully reduced national debt as a % of GDP from 230% of GDP to 30% of GDP, over a period of 40 years. However, the story after the First World War was very different. The UK finished the …
If Scotland gains independence, the Yes campaign has argued that their preferred option is to keep the Pound Sterling and enter into a currency union with the rest of the UK. This means sharing the same currency Pound Sterling, and having the same monetary policy. Monetary policy would continue to be set by the Bank …