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Rescooped by Graham Watson from BRICS and MINTS - A2 Macro Context
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Currency war could cause lasting damage to world economy

Currency war could cause lasting damage to world economy | International Economics: Pre-U Economics | Scoop.it
Mohamed el-Erian: In order for some currencies to depreciate, others must appreciate - here is where things get interesting, complex, and potentially dangerous

Via Geoff Riley
Graham Watson's insight:

An essential article to help you understand the nature of global trade and the influence of exchange rates on trade. The whole question of exchange rate manipulation is examined as are the dire consequences of a trade war.

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Geoff Riley's curator insight, January 26, 2013 10:00 AM

A hugely important article for A2 macro students. Currency wars threaten trade and wider macro stability as more and more countries seek to actively intervene in foreign exchange markets either to cause a currency depreciation or prevent an appreciation. Lots here that will help critical evaluation on currency questions. 

Cranbrook Economics's curator insight, January 27, 2013 1:29 PM

Hopefully this will refresh you year 13's into thinking about Exchange Rates and Currency issues from our pre-Unit 3 studies in September. Remember how significant Exchange Rates are to a countries trade balance (X-M) and how a country, if it wished and operated a Managed Exchange Rate, could intervene to make it exports artificially more compeitive. Have a read!!!

Mr Livingstone's BUSS4 External Environment's curator insight, February 24, 2013 10:41 AM

low currency means more competitvely priced exports.. Boost GDP!

International Economics: Pre-U Economics
A collection of articles relating to the 'international' elements of Economics and relating to the Pre-U syllabus
Curated by Graham Watson
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How much money do you need to be "super-rich"?

How much money do you need to be "super-rich"? | International Economics: Pre-U Economics | Scoop.it
These days it is not enough just to be a millionaire, to count yourself as one of the super-rich, you need to be worth between $50-100m.
Graham Watson's insight:

Something from the BBC's Richer World series about what it takes to be part of the super-rich; it also looks at the extent of income inequality in a number of countries, as well as the staggering amount of money that the super-rich spend on entertaining and so on.

 

Personally, I'm with George Best: "I spent 90% of my money on women, drink and fast cars. The rest I wasted,"

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Africa's new breed of 'solar-preneurs'

Africa's new breed of 'solar-preneurs' | International Economics: Pre-U Economics | Scoop.it
Economic growth and quality of life in Africa are being held back by lack of power - which is where a new breed of solar-powered start-up comes in
Graham Watson's insight:

This developmental piece looks at the way in which the small-scale harnessing of solar power can have a dramatic effect on the quality of life in small communities that are not connected to the traditional energy infrastructure.

 

M-Kopa is emulating M-Pesa in East Africa in bringing solar power to rural communities, and obviates the need for traditional, large scale state-owned energy companies - which are often hideously inefficient and corrupt - to provide power for these groups.

 

However, governments can influence the development of this sector with the appropriate tax polices, such as the removal of VAT on the sector in Tanzania.

 

And a reading plug - "The Boy Who Harnessed the Wind" by William Kamkwamba - tells a similar story regarding wind power in rural Malawi.

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Christine Lagarde is wrong: tackling inequality will not make everyone better off - Telegraph

Christine Lagarde is wrong: tackling inequality will not make everyone better off - Telegraph | International Economics: Pre-U Economics | Scoop.it
It is perfectly respectable to argue for a more equal society- but saying that it will increase wealth is not one of them.
Graham Watson's insight:

Another article on one of the themes 'du jour': inequality. In this piece, Matthew Lynn argues against the 'fashionable' argument that inequality is hurting growth and that more equitable growth is the way forward. It's well-argued but I can't agree with it - largely on one premise:

 

"Sure, the very rich don’t spend all their money. They save quite a bit of it. But neither do they stuff their money under the mattress. They either put it in the bank, and the bank will then lend it to people who do want it, or else they will invest it, and the money will go into a growing business which is creating jobs and wealth."

 

What happens if their 'saving' is in the form of buying financial instruments? How does that create growth? It will create some growth, but not very much and it won't be the sort of growth that increases living standards in the same way that purchasing something tangible in the 'real' economy would.

 

But it did set me thinking - and I agree that anything that's 'fashionable' in most walks of life, rarely stands up to close scrutiny...

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Even plutocrats can see profound inequality isn’t in their interests

Even plutocrats can see profound inequality isn’t in their interests | International Economics: Pre-U Economics | Scoop.it
Chrystia Freeland: As the smartest of the super-rich now understand, income inequality must be addressed before it tears societies apart
Graham Watson's insight:

It's clearly inequality week in the Guardian and the Observer this week, and it is an important topic, especially in the wake of Piketty's work. I will also say that the topic of inequality is a great differentiatior for my students - those who think its relevant and engage with it - or the good economists, as I know them, and those who don't think it's an important political issue - or the bad economists, as I know them.

 

I leave it to you to speculate on which group are more likely to end up working in the City.

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Davos is starting to get it – inequality is the root cause of stagnation

Davos is starting to get it – inequality is the root cause of stagnation | International Economics: Pre-U Economics | Scoop.it
Larry Elliott: Business leaders must understand that less inequality equals stronger, less debt-dependent growth
Graham Watson's insight:

The Guardian's Larry Elliott with his take on the major take-home message from Davos. Alas, for Larry, he's sceptical about the degree to which business leaders want to take this sort of thing on board. And if the don't, then that way secular stagnation lies. Quite a claim - but does it stack up? I'm not convinced; pessimism has been a fundamental feature of economic life since time began...

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A too powerful financial elite threatens wider prosperity

A too powerful financial elite threatens wider prosperity | International Economics: Pre-U Economics | Scoop.it
Will Hutton: Shadow chancellor Ed Balls and Harvard professor Larry Summers have produced a report that explodes some central myths about capitalism
Graham Watson's insight:

If you like a leftist view of inequality, then this Will Hutton piece will appeal, as will the Ed Balls/Larry Summers report, and whilst the actions of successive heads of Quindell don't reflect terribly well on capitalism, I think that the article should be focused rather more on the individuals and less on market capitalism itself.

 

As for the conclusion? Yes, there's something in it. But is there really a better alternative?

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Central Bank trickery without real reform - Telegraph

Central Bank trickery without real reform - Telegraph | International Economics: Pre-U Economics | Scoop.it
Mario Draghi, the president of the European Central Bank, lacks credibilty, writes Liam Halligan
Graham Watson's insight:

Liam Halligan attacks the president of the ECB, Mario Draghi, for undermining the long-term credibility of the bank by adopting QE in the manner which it has. Halligan's argument - and one that I, and other commentators has sympathy with - is that QE is presently avoiding the issue of serious structural reform within the Eurozone,  effectively keeping a sick patient alive with limitless cash transfusions rather than tackling the cause of the illness. And in the longer-term this isn't go to play out in a satisfactory manner.

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ECB unleashes financial 'bazooka' to bolster European market | Channel 4 News - YouTube

Subscribe to Channel 4 News: http://bit.ly/1sF6pOJ A major moment for Europe as the European Central Bank announces it's injecting a massive 1.1 trillion eur...
Graham Watson's insight:

Channel 4 news on the Eurozone decision to adopt QE - Paul Mason in good form (as the journalistic merry-go-round sees him settle at C4 News) - again, this is quite clear in stating what this means for the Eurozone economy.

 

Even Geng To Law might come to understand that QE doesn't stand for Queen Elizabeth...

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Martin Wolf on why trade imbalances matter - YouTube

Why do huge external imbalances herald disaster? Martin Wolf, the FT's chief economics commentator, explains what happens when some countries spend much less...
Graham Watson's insight:

The FT, in jocular form, as Martin Wolf explains trade imbalances in as simple a manner as possible. Remarkably, student-friendly stuff. Well done!

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Carney: Tech firms' tax 'very small'

Carney: Tech firms' tax 'very small' | International Economics: Pre-U Economics | Scoop.it
The amount of tax paid by some technology firms is "very small" relative to their returns, the governor of the Bank of England says.
Graham Watson's insight:

Mark Carney is quoted here, speaking at a BBC-hosted event in Davos. It's all very well him saying this sort of thing, but who's listening? And furthermore, are they able to take action?

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Seven years on, we are all still living in the shadow of the Great Recession - Telegraph

Seven years on, we are all still living in the shadow of the Great Recession - Telegraph | International Economics: Pre-U Economics | Scoop.it
The cyclical element of the eurozone's renewed crisis can squarely be blamed on the events of 2007 to 2009
Graham Watson's insight:

Allister Heath reflects on the fact that over the last 8 years we've not really cracked it and policy is still being determined by the global financial crisis and its aftermath. His view? Not the optimistic one offered by Tim Congden, but that this is all another postponement of the Eurozone endgame.

 

Which may, of course, start this weekend...

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The ECB has finally bowed to the inevitable - Telegraph

The ECB has finally bowed to the inevitable - Telegraph | International Economics: Pre-U Economics | Scoop.it
QE is not an answer. It is merely another stopgap to buy eurozone politicians yet more time
Graham Watson's insight:

Another positive assessment of the likely impact of QE in Europe, with Andrew Lilico of the view that it's a stopgap, an attempt to apply a sticking plaster to a the gaping wound that is the Euro and that it is scarcely credible in the long-term. Is he correct?

 

Time will tell - but with a number of people arguing that some action is better than no action (and you might try to pick the dreadful economics out of that statement!) - you might be forgiven for not looking upon today's policy change as the panacea it's been depicted as.

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Massive boost for eurozone unveiled

Massive boost for eurozone unveiled | International Economics: Pre-U Economics | Scoop.it
The European Central Bank announces it will inject at least €1.1 trillion into the ailing eurozone economy by means of a huge bond-buying programme.
Graham Watson's insight:

Look at what I can do - and with that the printing presses started, the Euro fell against the dollar, the 'dragon' of deflation had been slain: Mr.Draghi single-handedly saved the Euro.

 

Or so proponents of QE, and Europhiles might like us to believe. But I suspect that the way forward isn't going to be so straightforward. Is there an election upcoming?  

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Where next for the eurozone?

Where next for the eurozone? | International Economics: Pre-U Economics | Scoop.it
Syriza's election victory in Greece raises some difficult questions for the other countries using the currency and for the European institutions.
Graham Watson's insight:

A straightforward summary of the position after the election of Syriza which spells out some of the likely consequences of this for the Eurozone. And a very, very interesting table which shows who is owed what by the Greeks.

 

Coincidentally, statistics suggest the Greeks are the hardest working Europeans, in terms of hours worked. And the least hard-working? The Germans. I kid you not...

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Germany will relent on Greek debt – and Europe will suffer

Germany will relent on Greek debt – and Europe will suffer | International Economics: Pre-U Economics | Scoop.it
Josef Joffe: Alexis Tsipras has inflicted another defeat on Berlin. Merkel is no longer Empress Angela, and the real problems await in France and Italy
Graham Watson's insight:

Another article - this time in the Guardian - that suggests that the victory of Syriza spells greater uncertainty, the possibility of renegotiation and less pressure on Eurozone economies to adopt structural reform.

 

Josef Joffe suggests that without it Eurozone growth will continue to fall - all in all, a slightly un-Guardianlike piece.

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Euro finance chief warns Greece

Euro finance chief warns Greece | International Economics: Pre-U Economics | Scoop.it
Financial markets steady after Syriza Greek election victory, as the chief of the Eurogroup of finance ministers warns of little support for a debt write-off.
Graham Watson's insight:

Whither the Eurozone in the wake of the Greek election result - the short-term answer is 'Who knows' - with both sides apparently sticking to their guns, but the reality is that some sort of agreement is eventually likely to be reached.

 

The worry is that this process will take some time and in the interim, this uncertainty may spook the markets. The other issue is that any re-negotiation has implications for other Eurozone countries that have negotiated previous bailouts.

 

This is clearly a story to give a watching brief...

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What happens after shock and awe of QE subsides? - Telegraph

What happens after shock and awe of QE subsides? - Telegraph | International Economics: Pre-U Economics | Scoop.it
Only when umpteen million of Europe’s unemployed and dispossessed find jobs and hope will the issue be over.
Graham Watson's insight:

Roger Bootle on the Euro: good, clear and engaging but after a diet of QE at the end of last week, it almost induces a degree of indigestion.

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Devaluation and discord as the world’s currencies quietly go to war

Devaluation and discord as the world’s currencies quietly go to war | International Economics: Pre-U Economics | Scoop.it
Business leader: As quantitative easing spreads from country to country, investors are left nervous and discouraged: and stagnation follows
Graham Watson's insight:

This is an astute look at global currency markets over the past few months and it concludes that there's some chance of a beggar-thy-neighbour approach to devaluation, with lots of people seeking to gain competitive advantage via devaluation, but that there's not be an awful lot of coverage of this.

 

Full-scale currency wars would be foolish and self-defeating, so I hope that we don't go down this route.

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Mario Draghi's €1 trillion bazooka is just the beginning - Telegraph

Mario Draghi's €1 trillion bazooka is just the beginning - Telegraph | International Economics: Pre-U Economics | Scoop.it
While Russian politicians let their hair down and celebrities gave speeches at Davos, the biggest financial event was happening 200 miles away
Graham Watson's insight:

The increasingly excellent Szu Ping Chan summarizes Davos - and. yes, it's largely narrative but there are the odd bits of interesting analysis in there for those prepared to read the whole article.

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ECB warns over "weakened" EU project

ECB warns over "weakened" EU project | International Economics: Pre-U Economics | Scoop.it
A top official at the European Central Bank warns that unemployment and low growth are undermining the European Union.
Graham Watson's insight:

A top official at the ECB makes an early bid for this weekend's 'statement of the bleedin' obvious' award. Of course, the story doesn't fly if it starts "Head of Economics at Winchester College warns that..." but I can't see why not... 

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Super Mario returns - but is it enough? - YouTube

Mario Draghi, has announced a bigger than expected package of quantitative easing of €60bn per month, but will that be enough to revive the eurozone economy?...
Graham Watson's insight:

There's a remarkable change in the tenor of this piece - initial optimism replaced by a soberer assessment of the likely impact of Eurozone QE, more in line with today's press coverage.

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What a $7.54 Swiss Big Mac tells us about global currencies

What a $7.54 Swiss Big Mac tells us about global currencies | International Economics: Pre-U Economics | Scoop.it
With wild swings on currency markets as central banks keep life interesting, the index invented by the Economist provides a timely guide to market moves
Graham Watson's insight:

The Guardian with a piece on the analytical power of the Big Mac Index, which all top year macroeconomists should be aware of. However, rather disappointingly, it doesn't evaluate the flaws of the index.

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The Guardian view on QE in the eurozone: better late than never

The Guardian view on QE in the eurozone: better late than never | International Economics: Pre-U Economics | Scoop.it
Editorial: A continent dogged by stagnation is years behind the rest of the world. But at last Mario Draghi is setting the printing presses to work
Graham Watson's insight:

I've 'scooped' this Guardian editorial largely because I want to offer breadth of coverage and also because I want to try to get any students who glance at this board to "think like economists".

 

It is a particular bugbear of mine that the Euro seems to make normally sane-ish individuals behave in ways that make NO economic sense. The Euro is the best example of the "sunk cost fallacy" that I know of - we've spent so much establishing it and keeping it together that we have to keep it IRRESPECTIVE of the cost.

 

How is this good economics?

 

Equally, the "better late than never" tag is odd - either it's worth doing at the appropriate time or it isn't.

 

If QE has been to avoid deflation then it should have been started earlier; if we avoid deflation now, then QE is probably not responsible for it and thus the money expended is...

 

It is frustrating to see top-class professional economists overlook such fundamental truths. Get evaluating.

 

 

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Swiss fear hangover as ECB injects cash

Swiss fear hangover as ECB injects cash | International Economics: Pre-U Economics | Scoop.it
Imogen Foulkes explains why Swiss National Bank attempts to counter the ECB's cash injection for the eurozone have left businesses staring at bankruptcy.
Graham Watson's insight:

I arrived in my lesson this morning to fins one of my set holding forth on the Swiss franc, replete with a D&S diagram on the board explaining why the Euro had fallen as a result of QE and why Switzerland had abandoned the Euro peg that it had adopted. I don't think he had got into the implications of this for Switzerland. But had he done so, I hope that this is the sort of analysis that he'd have engaged in.

 

So, George Garnett - this article's for you...

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Peston: Will cheap euros save the eurozone?

Peston: Will cheap euros save the eurozone? | International Economics: Pre-U Economics | Scoop.it
Will the creation of more than a trillion new euros by the European Central Bank propel the eurozone out of the economic doldrums?
Graham Watson's insight:

I don't think Mr.Peston's been taken in by the 'smoke and mirrors' at Frankfurt, do you?

 

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