A debt spiral refers to a situation where a country (or firm or individual) sees ever-increasing levels of debt. This increasing levels of debt and debt interest become unsustainable, eventually leading to debt default. Types of Debt Spirals Public sector debt. This is debt that the government owe to the private sector (e.g. UK public …
When I do mock interviews for PPE at Oxford, one of my favourite questions to ask is. – Who should manage the economy – unelected professional economists or politicians who get elected but might not know about economics? There’s no easy answer. In practise it is an element of both. But, essentially, in a democracy, …
Readers Question: Is it possible to have negative interest rates? Negative interest rates occur when a bank charges you money for the privilege of looking after your savings. It is possible to have a negative interest rate (e.g. -0.5%) Although it is quite rare. The Bank of England have recently talked about the possibility of …
The great moderation refers to a period of economic stability characterised by low inflation, positive economic growth, and the belief that the boom and bust cycle had been overcome. In retrospect, economists look back on the great moderation in a different light because although inflation was low, there was great volatility in financial markets and …
Readers Question: In a non-recession situation, if a government reduces it’s borrowing and thus it’s spending, how can that have a depressing effect on the economy? Wouldn’t that money be either be loaned to someone else or spent to on goods and services by the people who have it? Yes. If an economy is growing …
Background to the EU 1957 Treaty Of Rome established the EEC between 6 original members 1960 EFTA between UK, Aus, Den, Nor, Port, Swiss and Swe 1973 UK, Ireland and Denmark join EC 1999 Creating of Euro single currency. Community Institutions European Commission, this is the civil service of the EU Council of Ministers from …
The Euro started Jan 1999 EMU involves Replacement of National currencies by the EURO Same Monetary Policy – Since “One Money” implies uniform interest rates Exchange Rates within the Euro area will cease to exist By mid 2002 national currencies will cease to be legal tender Pre Launch Blues Expectations about Inflation helped reduce actual …
In 2009, US and EU unemployment rates both stood at 10% – but since then EU unemployment has increased to 12% and US unemployment fallen to 7.9%. (see: US v EU unemployment) These contrasting fortunes in unemployment are a reflection of diverging rates of economic growth. Whilst, Europe has entered a double dip recession, the …