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 …
There is an oft repeated quote: “A recession is when you’re neighbour loses his job. A depression is when you lose your job. “ It is one thing to write about recessions, but, when you see job lay offs near where you live and when you hear about friends who are without work, it makes …
This graph shows how much interest rates have fallen in the UK. The Bank of England base rate is the main ‘official interest rate’ The 3 month libor rate is the rate at which banks lend to each other. It is important for determining interest rates set by the commercial banks. Interest Rates are likely …
Readers Question: What does it mean when Bank of England cuts interest rates by 50 base points? A basis point is one-hundredth of a percentage point. If the Bank of England cuts interest rates by 0.50% from 1.5% to 1.0%. This is a cut of 50 basis points. Usually, interest rates are cut in small …
Readers Question: Evaluate policies which a government could adopt in response to falling behind mortgage payments The problems of mortgage defaults are explained here What can the government / monetary authorities do? Cut interest rates. The MPC can cut interest rates as long as inflation is not a problem. However, the government do not set …
Readers Question: How can a smaller government fiscal deficit cause a larger international trade surplus? A smaller fiscal deficit means the government is reducing its borrowing. Therefore tax revenues must be increasing faster than government spending. A trade surplus means that the value of exports is greater than the value of imports. Suppose the government …
The Spanish economy is facing many difficult challenges. Housing Boom and Bust. Despite a relatively prudent banking sector, Spain experienced a real boom in the housing market. This was partly caused by foreign demand for holiday homes. House prices rose and there was also a boom in construction. Construction accounted for a large part of …
It is difficult to predict the dollar because there are few different factors pulling the dollar in different directions. Firstly, the dollar has been surprisingly resilient since the US slipped into its worst recession and US interest rates tumbled to near 0%. The resilience of the dollar is not based on economic fundamentals but, a …