Economics @ BSAK: Unit 4: Exchange rates, weak pound and J-Curve

Tuesday, 5 March 2013

Unit 4: Exchange rates, weak pound and J-Curve

An excellent recent article on the current state of the UK Pound.....+ other mascro issues for the UK. Click on the blue words to access further notes.

The UK export mystery - We've seen 30% devaluation in Pound Sterling, but the UK current account still worsened at the end of 2012.

- Does a devaluation actually help the economy or does it just make us poorer? Is a strong currency a good thing?

UK exports rise to non-EU countries. Away from the depressed EU economy, exports to China and India rose sharply. Export growth to BRIC countries was 35% between 2009 and 2012.

UK wage growth.

Real wages at the end of 2012 fell to levels not seen since 2003. That's the impact of the great recession. Unfortunately, there is no end in sight for stagnant real wages. A look at the impact of falling real wages for inflation, monetary policy and unemployment.

Do we have an inflationary time bomb? Many still worry the Bank of England has lost its anti-inflationary credentials as it happily watched the Pound slide, but when you look at figures for M4 money supply, it looks more like we are stuck in a severe recession.

- M4 Money supply

Negative Interest rates?

Could the Bank of England really implement negative interest rates? It has been done in Denmark, and it could be implemented for commercial banks borrowing from Bank of England. But, it is still unlikely to be implemented unless the Bank get even more desperate.

Osborne, debt and credit ratings - Report card for G.Osborne and the governments economic reforms. No grade A for Osborne. more likely a grade E for scraping a pass, just because they turned up to exam.