Readers Question: What is the impact of debt on the housing market in the UK? If the UK is in such a debt crisis, what impact has this had on the housing market. Firstly, a debt crisis could imply both government debt and household debt. The UK is facing a combination of both (see: total …
Readers Question: Should Greece pull out of the euro ? They are in the fifth year of recession despite EU bailouts – it seems like pouring money down a black hole. Yes. I believe they should leave the Euro. I put some arguments for and against here – Should Greece leave the Euro. Leaving the …
What are the Global Imbalances? US ran a large and persistent current account deficit (imports higher than exports) of up to 6.5% of GDP in 2006 Diagram of Current Account Surplus / Deficit in US and rest of world source: (1) 2. China ran a large current account surplus, accumulated foreign reserves, kept Yuan undervalued …
Quantitative easing aims to stimulate the economy and reduce gilt yields. A consequence of this is that lower bond yields lead to lower income for savers. This particularly affects pensioners who rely on income from savings to provide for their retirement. Since QE was implemented in March 2009, the income paid by pension annuities has …
Readers Question: Do the US have to depend on others to buy their bonds? The US doesn’t have to rely on other countries to buy their bonds. If there is sufficient domestic demand for buying US bonds, there is no need to rely on foreign investors. However, at the moment, about 30% of US bonds …
Readers Question: Could you please help me understand why high debt as a big percentage of GDP is bad, or at what point does it becomes bad? Japan is at something like 194%, and the UK at 500% (counting all debts and liabilities). Both countries are still waking up every day and going about business …
Readers Question: Is large government spending bad for economic growth? to what extent does empirical evidence support this assertion? How Government Spending Might Lead to Lower Economic Growth Higher spending leads to higher taxes. Higher income taxes may discourage people from working. High corporation tax might discourage firms from setting up in that country. (e.g. …
Readers Question: Every country’s economy has their own dynamics. Competitiveness is more or less adjusted by appreciation and depreciation of individual currencies in free economies. Then why is EU pressurizing Greece to stay in Eurozone? Except borrowings at a cheap interest rate, what are other real advantages of Euro? There are a few advantages to …