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 …
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 …
Politicians are often keen on making targets to eliminate budget deficits by a certain year. There is a strong political motivation to be seen as strong and committed to reducing government debt. Politicians who are vague about the debt are often heavily criticised and it is seen as poor politics. An advantage of budget deficit …
The Eurozone inflation rate is 0.4% (ECB database) (Sept 2014) Eurozone HCIP inflation rate HCIP (Harmonized consumer index prices) Source:| (ECB Inflation graphs, sometimes a few months outdated) Food inflation Food inflation is currently negative. Food inflation tends to be one of the most volatile components. This negative food inflation is one factor reducing the …
Readers Question: Why invest capita in purely competitive industries with equilibrium margins that are razor thin and entrants that erode quasi profits? Suppose volume is not exceptionally large, why then? Economic theory suggests that firms will invest in industries where there is supernormal profit being made. Investment will be more attractive in industries where there …
Readers Question: Why is house price inflation considered good while other forms of inflation are considered bad? Or are all forms of inflation bad for the economy? House price inflation has a mixed impact on the economy depending upon the extent and timing of the rise in house prices. This graph shows house price …
A trade deficit implies the value of imports of goods is greater than exports. (M>X) The trade deficit is an important component of the current account on the balance of payments. Sometimes people use a trade deficit and a current account interchangeably, but in the UK this is not correct. The current account also includes …
Readers Question: How do bond spreads affect the value of the Dollar or Euro? A bond yield refers to the interest payment that you receive from holding the bond yield. If the yield is 4%, you can expect £4 a year from a £100 bond. A bond spread refers to the differences in bond yields. …