October 31st, 2007, the US federal reserve cut interest rates by a quarter of a point to 4.5%. This follows on from a half point cut, a few weeks ago. The logic for falling interest rates in the US includes: Weak Housing Market – House prices falling, sales plummeting. This negative wealth effect is likely …
China recently became the second largest economy in the world. According to the IMF, in 2010, the Chinese economy was $5,878,257 million – second only to the US economy. If we use GDP at purchasing power parity, the size of the Chinese economy is estimated to be even larger, at around $10,119,896 million. However, it …
Readers Question: Can you explain what happens to wealth when e.g share price, property prices fall? Do they just vanish into thin air, or is money just being transferred from one person to another? In other words, are all investment a zero-sum game? What happens when prices rise? Is there a simple example that can …