Money Supply is an important indicator of economic activity. A slowdown in money supply growth hints the EU is facing the prospect of very low inflation or even deflation. Since the start of 2010, the growth of M1 has fallen significantly for the Euro area. These figures show the whole Eurozone area, however, in the …
Sterlised Bond Purchases. This occurs when the Central Bank purchase government bonds without affecting the money supply, i.e there will be no inflationary impact of buying bonds from commercial banks.
Readers Question: What have been the drivers of the mortgage default rate in the 2008 recession compared to the late 1980s/ 1990s? Despite the depth of the recession in 2008, the mortgage default rate in the UK has been lower in the current recession than in the early 1990s. The peak for home repossessions occurred …
A two speed Europe refers to how, within the EU, economies are growing at different rates and are at different stages in the business cycle. For example, countries in the core of the Eurozone (Germany, Netherlands, France) have seen relatively good recovery since the recession. In these countries, unit labour costs have remained competitive, enabling …
Readers Question. Lastly, what effect would a poor unemployment figure (e.g. lower than expected nonfarm payroll numbers) have on a country’s currency? Is it likely to strengthen (due to lower expectations of inflation) or weaken (due to less domestic productivity and higher imports? Poor unemployment figures would probably weaken the currency. If unemployment figures are …
Readers Question: On Jan 2009 I asked a question on the greek current account deficit, the fixed EUR rate, the lack of competitiveness and the debt load and you expanded brilliantly on the dangers of the twin deficits and the deteriorating Greek credit quality. Now I just need to make a comment that all the …
In times of uncertainty, people seek to find a safe investment. But, what are safe investments? Gold is currently over $1,500 May 2011 Gold / Silver. These are typically seen as a good investment and safeguard against inflation. Inflation decreases the value of money, but gold retains its value. With experiments in quantitative easing, there …
Q. Why does Japanese Yen appreciate after Earthquake and Tsunami? Japan has suffered a tragic natural disaster. Aside from the very real human tragedies, it will have an adverse economic impact. Yet, since the crisis, the Japanese Yen has appreciated in value. Why has the Yen appreciated when perhaps you may have expected the opposite? …