Readers Question: If the markets decide the UK is not such a safe haven and bond yields rise will pension funds heavily weighted in Gilts tend to fall? Yes. If investors feel that the UK is not a safe haven (they feel increased risk of UK government default). Then investors will sell UK bonds, this …
Readers Question: What on Earth is the point of the Eurozone borrowing money from China when the ECB can print any amount of money it wants any time? Of course the effect of the ECB printing money donating it to indebted Euro countries and/or the banks holding those countries’ bonds is likely to be inflationary …
Readers Comment on UK National Debt – What we are doing now is not dissimilar to Roy Jenkins’ cuts in the late 60′s he brought us out of an £800m deficit into a £387m surplus, toughen up and let the economy settle. There are several examples of where governments have been able to transform public …
Readers question: What exactly are the solutions to the EU crisis? It is a difficult question to answer. The dynamics of the single currency mean that many of the conventional solutions to economic problems cannot be used. The difficult task is to reduce levels of government borrowing whilst also managing to target economic recovery and …
Readers Question: If Britain’s economy gets hurt how will the Americans be affected? A recession in the UK would have a negative impact on the US. Lower growth in the UK would cause lower consumer spending and therefore the US would experience a small fall in exports and therefore lower growth. However, exports to the …
Three questions on quantitative easing, inflation and why inflation in the UK is high despite falling real incomes and lower consumer spending. Readers Question: Isn’t the government (of UK) already printing lots of money? The Bank of England have electronically created money and used this to buy government bonds from financial institutions. The Bank created …
Readers Question: I have a hunch that Keynesian responses to recession work best in industrial countries such as China and 1930’s USA as opposed to post industrial societies such as the US and UK. In the great depression consumption and production were, generally, in the same countries, e.g. cars produced in America would be consumed …
Standard & Poor downgraded the US fiscal position from AAA to AA. This reflects the credit rating agencies believe that the US fiscal position has deteriorated and they are more pessimistic over long term fiscal consolidation in the US. It means that the rating agency feels the threat of US defaulting on its federal debt …