Comments for Economics Online Blog

Comment on UK credit rating downgraded by Kevin Julien

Kevin Julien — Sat, 23 Feb 2013 11:57:44 +0000

It is understandable why George Osborne put a lot of emphasis on the UK’s AAA rating.
However, the credit rating agencies want two conflicting things. They want government spending cuts to reduce the deficit and they also want economic growth. The experience of the UK economy since the Coalition Government took office is that both cannot be achieved at the same time in the short term. I question the Chancellor’s economic strategy which has so far has failed on its own terms. But there was no way he was going to be able to satisfy the credit rating agencies in order to maintain the AAA rating.

Comment on Greek exit nearer by G. Anastasiadis

G. Anastasiadis — Sun, 16 Sep 2012 00:41:03 +0000

The online source is great. The article however is assuming too much but is quite educational since it represents the way analysts in the US and UK look at developments in the Eurozone. In the end, it is turning out that Greece is no much different to Spain or anyone else and the implied systemic risk of Grexit is too high for the EZ to handle as it would lead to the dissolution of the Euro (at least this is what EU leaders have come to believe).

A major source of misunderstanding stems from the fact that the Greek case was never what the press made it out to be. The country, despite its many weaknesses, achieved a massive reduction of its deficit by 11% of GDP in 3 years probably achieving a primary surplus this year. It raised exports by 35% imlying no need to exit in order to devalue the currency. Debt repayments have been secured up to 2023 and in any case were never a serious issue as debt could be easily rescheduled. Speculators lost their money betting on Grexit because they thought they were dealing with a little isolated country rather than the EU. Anyone who bought Greek bonds since May 2012 made a 65% return while stocks rose by 55%.

Another source of misunderstanding was the fact that EU creditors (like Germany) made agressive statements towards Grexit for the purspose of scaring other debtors like Portugal, Ireland and Spain to toe the line of austerity and reform thus requiring less bailout funds from crediotrs. Now that the latter has been achieved creditors have less of an incentive to torture the Greeks with Taliban style policies imposed by the Troica and a compromise will be reached.

Comment on Greek exit nearer by roger

roger — Fri, 22 Jun 2012 16:13:04 +0000

Looks like a terrific resource for A level Economics -well done

Comment on More quantitative easing by Percival Thomas

Percival Thomas — Tue, 25 Oct 2011 22:25:52 +0000

Am I right in thinking that an increase in QE is really an increase in the old money supply?. And how effective is QE in increasing Aggregate Demand? Consumption is the main part of aggregate demand, so consumers want money in their hands to spent, especially those with high Marginal Propensity to Consume. Give these consumers a about £200 for Christmas and let them spend to help business in the UK. But we have a high Marginal Propensity to Import. At least we will get some spending.