Why Long Boom in House Prices?

Readers Question How do you explain the long boom in house prices from the late 1990s? There were several reasons for the long boom in house prices between 1994 and 2007. Low Interest rates. In the early 1990s, UK interest rates reached 15% and were in double figures for several months. After the 1991 recession …

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Why Does Federal Reserve Buy Treasuries?

Readers Question: Why does the federal reserve buy treasuries? Isn’t that just taking money from one pocket and putting it in another? There are a few reasons the Federal Reserve is buying treasuries. With recession and falling velocity of circulation, the Money supply adjusted for velocity of circulation is showing deflation. Therefore buying Treasures and …

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Question: Why do Government fail to meet macro objectives?

Readers Question: Why do the Government often fail to achieve its main objectives of high economic growth, price stability, and a surplus on the balance of payments. Other objectives worth adding are low unemployment,  low government borrowing and maybe stable exchange rate. Looking at the current climate of the UK economy, the government is only …

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Safety of The Dollar

The US Dollar is often viewed as a safe haven currency. It is still the world’s reserve currency and the thinking is that if the dollar goes bust the rest of the world will be in an even worse situation. Therefore, during the worst of the economic turmoil, the dollar remained relatively strong because investors …

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Economic Snapshot Budget 2009

The Chancellor used the Budget speech to cut his growth forecasts. The economy is now expected to contract by 3.5pc this year, but grow 1.25pc in 2010. This would mean growth starting towards the end of this year. The IMF are more pessimistic forecasting negative growth in 2010 of -0.4% (see – slow economic recovery) …

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Weak Sterling and effects on Economy

Readers Question: Is there any other political influence on the falling rate of sterling, something like monetary policy or political uncertainty? And why did some news reports say inflation and weak sterling could be helpful to UK economy? Thanks. The value of a currency is primarily influenced by economic factors. E.g. weak sterling can be …

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Euro as World’s Reserve Currency (2009)

The US dollar surprised many people by retaining its value for a long period during this economic crisis. Despite, 0% interest rates, increasing government debt, and a current account deficit, many were still buying the dollar as it was perceived as ‘relatively safe’ However, the recent plan by US treasury to buy even more assets …

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M4 Growth in UK (2009)

M4 is known as the ‘broad money supply’. It is a measure of notes and coins in circulation (M0) + bank accounts. This includes private-sector retail bank and building society deposits + Private-sector wholesale bank and building society deposits and Certificate of Deposit. The Bank of England produce figures on M4 growth. [link] Money supply …

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