Original Article: http://blogs.wsj.com/source/2012/06/01/jubilee-will-lengthen-u-k-recession/
As Britons celebrate Queen Elizabeth II's 60 years on the throne with one extra holiday, the UK economy is likely to suffer from this day off. Although national holiday usually boosts consumption, the fact that national output will come to a stop for the day exerts exceptional pressure on the GDP for the second quarter. Furthermore, some factories, especially smaller ones, are likely to shut down for up to a week. The significant loss on output will negatively influence the GDP calculation for the second quarter and leave it very little time to recover. As can be expected, a bad quarterly GDP number will dampen market confidence, discouraging business from expanding and households from consuming. This will be likely to further decrease the GDP value for the year. As the UK has unexpectedly returned to recession in the first quarter of 2012, this blow will be vitally destructive as UK strives for a recovering economy.
Tuesday, June 5, 2012
9th Week Post on Economics News about the UK
Original Article: http://www.nytimes.com/2012/06/05/business/global/nervous-europeans-snap-up-london-property.html?_r=1&src=me&ref=business
As is reported by the New York Times, foreign investors, particularly European investors, are flooding into the prime real estate industry in London. With a deteriorating economy in the Euro Zone, European investors are seeking safe shelter to preserve the value of their wealth. Among all options, with a relatively stable economy and averagely high value of prime property, expensive London flats are favorite with most investors. The tremendous capital inflow infers a trade deficit in the UK. This can be proved by looking at the national accounting equation, Y = C + I + G + NX. (Y - C - G) refers to national saving, and (Y - C - G) - I is the difference between saving and investment. Capital inflow implies net foreign borrowing. That means saving is less than investment; equivalently, (Y - C - G) - I < 0. Since (Y - C - G) - I = NX, we have NX < 0. Therefore, export is smaller than imports; the UK is having a trade deficit. This can be verified by looking at the international trade data for the UK. The most recently published government information indicates a trade deficit of 2.7 billion pounds in March. The gap between exports and imports can be exacerbated as the increasing demand for British Pounds increases the value of GBP, leading to more expensive British goods and declining exports.
As is reported by the New York Times, foreign investors, particularly European investors, are flooding into the prime real estate industry in London. With a deteriorating economy in the Euro Zone, European investors are seeking safe shelter to preserve the value of their wealth. Among all options, with a relatively stable economy and averagely high value of prime property, expensive London flats are favorite with most investors. The tremendous capital inflow infers a trade deficit in the UK. This can be proved by looking at the national accounting equation, Y = C + I + G + NX. (Y - C - G) refers to national saving, and (Y - C - G) - I is the difference between saving and investment. Capital inflow implies net foreign borrowing. That means saving is less than investment; equivalently, (Y - C - G) - I < 0. Since (Y - C - G) - I = NX, we have NX < 0. Therefore, export is smaller than imports; the UK is having a trade deficit. This can be verified by looking at the international trade data for the UK. The most recently published government information indicates a trade deficit of 2.7 billion pounds in March. The gap between exports and imports can be exacerbated as the increasing demand for British Pounds increases the value of GBP, leading to more expensive British goods and declining exports.
8th Week Post on Economics News about the UK
Original Article: http://www.bloomberg.com/news/2012-06-04/german-2-year-yield-drops-below-zero-as-crisis-deepens.html
Spanish bond yields rose as the Spanish Prime Minister urged European leaders to protect banks in the Euro zones. The rising bond returns signal a stabilizing Spanish bond system. Further, a falling unemployment rate in Spain boosts market confidence. Consequently, it is expected that investor confidence on the Spanish economy will be slightly gained back upon the promising economic indicators. A most direct effect over the British economy will be that, as Spanish bond yields go up, investors will direct their capitals into Spain, which will reduce investment on British bonds. As a result, the demand for British pounds will go down, leading to British Pounds depreciation. The change in British Pounds value will in turn influence trades between the UK and other countries in the world.
Spanish bond yields rose as the Spanish Prime Minister urged European leaders to protect banks in the Euro zones. The rising bond returns signal a stabilizing Spanish bond system. Further, a falling unemployment rate in Spain boosts market confidence. Consequently, it is expected that investor confidence on the Spanish economy will be slightly gained back upon the promising economic indicators. A most direct effect over the British economy will be that, as Spanish bond yields go up, investors will direct their capitals into Spain, which will reduce investment on British bonds. As a result, the demand for British pounds will go down, leading to British Pounds depreciation. The change in British Pounds value will in turn influence trades between the UK and other countries in the world.
Thursday, May 31, 2012
Course Reflection
Though considered the most basic common sense for anyone who studies economics, I never stop finding the supply - demand model to be highly useful in interpreting how the world functions. Supply and demand in the market for goods and services have a direct and fundamental influence over the prices and quantity. Furthermore, supply and demand are highly applicable in markets outside goods and services. In the labor market, foreign exchange market and loanable funds market, the way these markets function is simply supply and demand in disguise. Wage rate, exchange rate and interest rate are essential the same as price for physical goods in their respective models. The supply - demand model can be used to explain so many economic activities that one can never overestimate its value.
I would be interested in gaining a more in-depth exposure to the cultural differences between countries, such as how people converse and how they cope with ambiguity. This will be valuable human-focused knowledge, as is different from the technical-oriented models and equations that I am familiar with.
For any students who are considering taking the class, it is advised that they grow into the habit of pondering over an economic issue and trying to interpret a single issue from different angles. I find it highly helpful to constantly try to understand the economic news using the concepts we learned (or reviewed) in class. It brings everything I have learned into real-life application as opposed to textbook examples. I find myself a more mature critical thinker after this course, rather than merely good at models and math. Consequently, I highly suggest a serious student to keep thinking economically, whether it be class reading or world news. Exercises of this sort hone the brain.
I would be interested in gaining a more in-depth exposure to the cultural differences between countries, such as how people converse and how they cope with ambiguity. This will be valuable human-focused knowledge, as is different from the technical-oriented models and equations that I am familiar with.
For any students who are considering taking the class, it is advised that they grow into the habit of pondering over an economic issue and trying to interpret a single issue from different angles. I find it highly helpful to constantly try to understand the economic news using the concepts we learned (or reviewed) in class. It brings everything I have learned into real-life application as opposed to textbook examples. I find myself a more mature critical thinker after this course, rather than merely good at models and math. Consequently, I highly suggest a serious student to keep thinking economically, whether it be class reading or world news. Exercises of this sort hone the brain.
Wednesday, May 23, 2012
Response of "Beware of Greeks Bearing Bonds"
Original Article: http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010
The passage that I have found particularly interesting is the author's discussion on how Greeks find it difficult to compliment other Greek's successes. Indeed, by the author's account, it is almost impossible for Greeks to view the success of their fellow men without suspicion of misconduct and bribe. There has been such mistrust among the Greek people that everyone is devoted to the pursuit of self-interest and self-interest only. This relates later to the infamous Vantopaidi scandal. The public criticism is highly concentrated on the group of monks who have manipulated the Greek government to obtain wealth because, as the author put it, "some outside party...comes in and exploits and corruption of their system. Enter the monks." Given such a high emphasis on self-interest by a nation, it can be expected that even the seemingly holiest group intends to squeeze wealth with deceptive scheme. Further, with a nation that has such inclination to doubt and reproach others and detect no fault with themselves, it comes as no surprise that the country will lay blames on a single group of monks without reservations. This cultural traits of the Greek nation has somehow explained the scandal from the roots.
Although the Greek economy is nothing but small compare to the other European Union countries, crisis in Greek is expected to threatens the whole Euro Zone. Sharing currency, the Euro Zone is more mutually integrated than any other countries in the world. If Greek defaults, which naturally dampen investors' confidence in the European economy, foreign investors will withdraw their investment in Europe and domestic investors will move their assets abroad to preserve their wealth's value. As a consequence, the aggregate demand for Euro will decrease, and a weaker currency will negatively influence all countries in which the currency is in circulation.
The National Income is consisted of consumption, investment, government expenditure and net export. As the Greek government cut government spending, the National Income will decrease rather than increase. Further, an increase in taxes will reduce Greek household's income, which in turn decrease consumption. Thus, the measure in fact will do no good in bringing up the country's GDP.
The passage that I have found particularly interesting is the author's discussion on how Greeks find it difficult to compliment other Greek's successes. Indeed, by the author's account, it is almost impossible for Greeks to view the success of their fellow men without suspicion of misconduct and bribe. There has been such mistrust among the Greek people that everyone is devoted to the pursuit of self-interest and self-interest only. This relates later to the infamous Vantopaidi scandal. The public criticism is highly concentrated on the group of monks who have manipulated the Greek government to obtain wealth because, as the author put it, "some outside party...comes in and exploits and corruption of their system. Enter the monks." Given such a high emphasis on self-interest by a nation, it can be expected that even the seemingly holiest group intends to squeeze wealth with deceptive scheme. Further, with a nation that has such inclination to doubt and reproach others and detect no fault with themselves, it comes as no surprise that the country will lay blames on a single group of monks without reservations. This cultural traits of the Greek nation has somehow explained the scandal from the roots.
Although the Greek economy is nothing but small compare to the other European Union countries, crisis in Greek is expected to threatens the whole Euro Zone. Sharing currency, the Euro Zone is more mutually integrated than any other countries in the world. If Greek defaults, which naturally dampen investors' confidence in the European economy, foreign investors will withdraw their investment in Europe and domestic investors will move their assets abroad to preserve their wealth's value. As a consequence, the aggregate demand for Euro will decrease, and a weaker currency will negatively influence all countries in which the currency is in circulation.
The National Income is consisted of consumption, investment, government expenditure and net export. As the Greek government cut government spending, the National Income will decrease rather than increase. Further, an increase in taxes will reduce Greek household's income, which in turn decrease consumption. Thus, the measure in fact will do no good in bringing up the country's GDP.
Monday, May 21, 2012
7th Week Post on Economics News about the UK
Original Article: http://www.businessweek.com/news/2012-05-16/u-dot-k-dot-unemployment-unexpectedly-falls-in-stabilization-sign
The unemployment rate in the United Kingdom as measured by International Labour Organization methods demonstrates decline in the first quarter of the year. The newly published figure is 8.2 percent, as compared to a 8.3% at the beginning of 2012. Jobless-benefit claims also fell by 13,700 from March. Compared with what the Bank of England had predicted before, the growth in the job market is still weak. Yet, the data have delivered a promising signal that the UK is recovering, though at a relatively slow rate, from the crisis, as is shown by an increasingly stable labor market. As a positive consequence, firms are encouraged to expand business with the sound economic data and to increase investment. With rising confidence from firms, it is expected that firms will expand hiring and provide more jobs in the market. It is also hoped that a stable economy will attract more foreign firms to establish business within the UK and thus, provide more employment. However, the recent negative news with regard to the Greek exit from the Euro Zone has raised concern within the UK borders. Multinational companies that have a significant volume of trades with the Euro Zone are specifically concerned with the outcome of the incident, since exports to Europe are predicted to decline as its economic prospect deteriorates. It is anticipated that the new Euro Zone financial hit will have a consequential influence over the British economy, especially that firms in the exporting industry are likely to cut employment as a response to the ambiguity in the European economy. This will again strike the job market in UK negatively.
The unemployment rate in the United Kingdom as measured by International Labour Organization methods demonstrates decline in the first quarter of the year. The newly published figure is 8.2 percent, as compared to a 8.3% at the beginning of 2012. Jobless-benefit claims also fell by 13,700 from March. Compared with what the Bank of England had predicted before, the growth in the job market is still weak. Yet, the data have delivered a promising signal that the UK is recovering, though at a relatively slow rate, from the crisis, as is shown by an increasingly stable labor market. As a positive consequence, firms are encouraged to expand business with the sound economic data and to increase investment. With rising confidence from firms, it is expected that firms will expand hiring and provide more jobs in the market. It is also hoped that a stable economy will attract more foreign firms to establish business within the UK and thus, provide more employment. However, the recent negative news with regard to the Greek exit from the Euro Zone has raised concern within the UK borders. Multinational companies that have a significant volume of trades with the Euro Zone are specifically concerned with the outcome of the incident, since exports to Europe are predicted to decline as its economic prospect deteriorates. It is anticipated that the new Euro Zone financial hit will have a consequential influence over the British economy, especially that firms in the exporting industry are likely to cut employment as a response to the ambiguity in the European economy. This will again strike the job market in UK negatively.
Sunday, May 20, 2012
6th Week Post on Economics News about the UK
Original Article: http://www.nytimes.com/2012/05/18/business/global/chance-of-greece-exiting-euro-grows.html?pagewanted=all
A possible Greek exit from the Euro Zone has recently raised international alarm to the well-being of the Euro Zone financial system. It has been observed that if Greece departs from the Euro Zone, the international fear on whether Europe will survive the crisis as a whole will once again be aggravated. It can be expected that investment in the Europe will decline; depositors will withdraw their money from the European firms and banks. The most direct result will be a significantly weaker currency. International trades will be influenced as a result of the change in capital flows. For United Kingdom, a stronger GBP will decrease British exports and increases imports from Europe, since the British goods have become relatively expensive and European goods relatively cheap. Thus, the net export sector in the UK GDP will decline. Given that the Euro Zone is one of the biggest trading parties with the UK, this financial turmoil in Europe is expected to exert significantly negative effect on the British economy.
A possible Greek exit from the Euro Zone has recently raised international alarm to the well-being of the Euro Zone financial system. It has been observed that if Greece departs from the Euro Zone, the international fear on whether Europe will survive the crisis as a whole will once again be aggravated. It can be expected that investment in the Europe will decline; depositors will withdraw their money from the European firms and banks. The most direct result will be a significantly weaker currency. International trades will be influenced as a result of the change in capital flows. For United Kingdom, a stronger GBP will decrease British exports and increases imports from Europe, since the British goods have become relatively expensive and European goods relatively cheap. Thus, the net export sector in the UK GDP will decline. Given that the Euro Zone is one of the biggest trading parties with the UK, this financial turmoil in Europe is expected to exert significantly negative effect on the British economy.
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