This is an article published in the LSE about the Austrian view of the Eurozone crisis ‘The Work of Hayek shows why EU governments can’t spend their way out of problems‘ I’ve attempted to summarise the article, but I advise reading it for yourself: The recent boom and bust was caused by artificially low interest …
Readers Question: Would a devaluation help Greece? If you look at the Greek economy, their exchange rate has been effectively overvalued for several years. This overvalued exchange rate has caused Greek exports to be relatively uncompetitive and has caused various economics problems. Combined with efforts to tackle an unsustainable debt level, the over-valuation has contributed …
Readers Question: With talk of a Greek exit from the Euro, the situation is almost always compared to Argentina in the 1980s and 90s. Can you explain what happened there and how it was resolved. In the 1980s, Argentina built up substantial debt and also suffered from periods of very high inflation. To stabilise inflation, …
The BBC have this infographic about what happens if Greece leaves the Euro. Source: BBC But, when I look at this. Everything has already happened. Greece is already in recession. It has been in recession for past 5 years. Greece already has bank runs. Multinationals are not keeping money in Greek banks Due to unemployment …
An Overview of the Indian economy in 2012 and its prospects for the future. (Depressed by events in Europe, a look at an economy with a very different economic outlook). Summary In the past few years, the Indian economy has been growing rapidly – (e.g. 8.5%2010-11). However, this growth has led to an increase in …
The Net international investment Position (IIP) measures the balance of gross assets – gross liabilities. An asset means the UK has a claim on the rest of the world. A liability means the rest of the world has a claim on the UK. There are 4 sections of net international investment. direct investment (DI) portfolio …
Readers Question: I keep reading about our country’s trade deficit which was £3bn in April. How does that work, if a country is spending more than it’s earning? Are we getting ourselves into more debt? I read that Germany has a trade surplus, which is not surprising but why can’t we do the same? There …
For manufacturing investment, the real interest rate is important for determining the viability of investment. Lower interest rates make it cheaper to borrow. Therefore lower interest rates tend to encourage business investment. High real interest rates discourage investment. How interest rates affect the efficiency of investment At lower interest rates, the marginal efficiency of capital …