In 1980, Mrs Thatcher made a memorable speech. “To those waiting with bated breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The lady’s not for turning!”(BBC Link) Background – The economy was struggling under the deflationary fiscal and monetary policy. Mrs Thatcher …
In economics, there is often a trade off between macro economic variables. A simple trade off could be – increase interest rates; this leads to lower inflation, but also lower output. Cut interest rates, and you help boost growth, but increase inflation. In an ideal world, we would have low inflation, high growth and full …
The UK economy faces a few paradoxes. Low Growth – High Inflation. Firstly, after a deep recession the economic recovery is weak. In theory, high unemployment and low growth should lead to low inflation. However, due to rising energy and food prices, we have inflation above target. This presents a conundrum for the Bank of …
Readers Question: From the current economic crises government has been slashing its base interest rates to now 2%. However, how would deflation which is currently being experienced in several countries mainly due to decreasing fuel prices affect the attempted recovery from this crisis? Deflation makes monetary policy much less effective. In fact, deflation can cause …
Readers Question: I’m not studying economics, just a normal person trying to make some decisions about my future and asking for advice on just how bad things are going to get over the next few years. I have a pessimistic friend who says currencies will collapse and I should be stocking up on tinned food, …
Readers Question: I thought your explanation about whether to worry or not about the National Debt was pellucid but I would like to know, from an economics perspective, why governments (and people) were not worried about the debt after World War 2 given that it was far higher for many years than the UK debt …
“Don’t Panic, Captain Mainwaring.” – Dad’s Army The famous catchphrase could perhaps be adapted to UK debt levels. The 1940s and 1950s, were an example of high debt, but, it didn’t cripple the UK economy, the 1950s proved to be a decade of full employment and was one of the longest periods of economic expansion …
Readers Question: Where is the US economy headed? Is it inflation or depression? Recently, Goldman Sachs predicted a rough year ahead for the US Dollar. They forecast the dollar may fall against Pound Sterling to $1.85 in 12 months. Against the Euro, they forsee it to fall to $1.55 in a year’s time. Exchange rates …