A key feature of macroeconomic analysis is the relationship between a country’s savings and investment rates. Savings represent income that is not consumed. Investment means spending on assets that will last for some period of time, such as factories, houses, … Continued
Finance theory is rooted in the conventional neoclassical economics assumptions of how rational people approach risk. It assumes that people can mostly be thought of as having consistent preferences over outcomes, evaluated according to the probability of their happening. Rationality, … Continued
The Financial Times reported yesterday that Germany was making an audit (*) of its gold holdings, much of which are abroad. The newspaper Suddeutsche apparentlu estimates that about 1,500 tonnes of the total 3,400 tonnes of German owned gold are … Continued
The recent death of British historian Eric Hobsbawm produced a surprisingly broad range of eulogies, even from those who were repelled by his long term membership of the Communist Party (Niall Ferguson for example turned out to be a good friend … Continued
I’ve just read an interesting, thoughtful and of course slightly self-serving speech by the Governor of the Bank of England, Sir Mervyn King, for whom I have a great deal of respect. Titled “Twenty Years of Inflation Targeting” it reflects … Continued
Centrally planned economies work very badly for two reasons. First, even if you had accurate data on what customers wanted and all the technical relationships between inputs and outputs, you would have a computational problem far beyond any practical solution. … Continued
Yesterday in class a question arose as to whether the Federal Reserve (the US central bank) is keeping US government interest rates down by buying government bonds in the market. By adding to the demand for bonds, relative to a … Continued
Quantitative easing (QE) has become a highly controversial policy, particularly in the USA, where the Federal Reserve has been criticised by politicians, investors and academics up to and including the charge of treason. Yet the Chairman of the Fed, Ben … Continued
Every country’s economic relations with the rest of the world are summarised in the balance of payments. This is divided into the current account, which records the flows of trade and income, and the capital account, which records the flows … Continued
Financial repression is a term used by economists which means the government taking ordinary people’s savings to achieve some goal, typically to pay for the government itself, by exploiting imperfections in the financial system. It is an indirect form of … Continued
I last visited South Africa in 1987, during the apartheid period. Since at that time there was a cultural and economic boycott of the country, I should explain to alarmed friends that I was there because I was working for … Continued
The International Monetary Fund (IMF) is the one organisation that has come out of the financial crisis of 2007-09 in better shape than it went in. Set up to police the system of fixed exchange rates that was the basis … Continued
Australia is often known as the lucky country. Not that all of its history has been lucky but in the last twenty years it has been one of the largest beneficiaries of fast Chinese economic growth. About a quarter of … Continued
A phrase that pops up regularly in Chinese financial and economic commentary is the internationalisation of the RMB (renminbi – the people’s currency). What does this actually mean? Internationalisation is not an official or recognised economics term but China uses … Continued