Phew, that was a long title.
Yes, it's a posting of 4 topics. So treat them as 4 separate blog posts.
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The OECD (Organisation for Economic Cooperation and Development) has recently released their latest outlook for the member economies (mainly US, EU nations, and Japan). One recommendation that they mentioned in the outlook was the warning that the US, UK and Canada should raise interest rates to 3.5% "latest by the end of this year". Another was recommendations for fiscal tightening in all member countries, to ease those budget deficits and please bond markets.
But there are problems with their recommendations, though.
In times like now, where the economy is still quite fragile, it seems a bit risky to use both contractionary fiscal and contractionary monetary policies together in such a short period of time.
Yes, these governments have to restore confidence and calm markets about their sovereign debts, so as to avoid a debt crisis like the one in Greece (especially in the PIIGS - Portugal, Italy, Ireland, Greece, Spain). And yes, George Osbourne, pay off debt now, and there's less later. But the concern now is whether it's too early to take away the support the economy still needs - unemployment in the States is still rising, as is expected in the UK until Mid-2010. Consumer confidence and spending is not exactly strong, either. And with the Euro still tumbling thanks to Greece and Merkel, I suspect the UK will be affected by poor exports as well.
And I've not even got to the raising of interest rates yet. Raise that, and people on mortgages would have to spend more of their income on loan repayments, assuming these people still have a job. Also, higher costs of borrowing isn't very helpful to businesses which are planning to reduce their workforce. This could have an impact on aggregate demand, employment, consumer confidence, and ultimately, economic growth.
Oh, and let's not forget what Mervyn King mentioned about the inflation rate in the UK. It was 3.7% CPI, above the 2(±1)% target. Reasons? Well, VAT went back up from 15% to 17.5% in January, oil prices rose 80% y-o-y, and so did food and clothing prices. Mervyn's concern is that at the moment, the upward pressure on prices are short-term, and they are masking the downward pressure on prices as a result of the spare capacity in the economy, created by the recession.
With these factors in mind, I would think interest rates shouldn't go up until GDP growth has stabilised. Get the easy money flowing a bit more. before worrying about an overheating economy.
As for the fiscal policies, the governments would probably know best. They have to calm markets at both ends - on one end, you want to keep spending to get economic growth again; on the other hand, you want to keep bond markets and credit ratings agencies happy by cutting spending/borrowing. It's a balancing act. Looking at Greece, there appears to be strong pressures to cut spending/reduce borrowing. But not so much that the economy enters a double-dip. (PIIGS are an exception, I guess. They MUST cut spending.)
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In other non-Econs news, have you checked out the new BBC iPlayer? It's in testing now, and it'll replace the current design in June/July. One feature that is planned, according to the Financial Times, is the ability to search for content from other networks (BSkyB, ITV, Channel 4, etc.) and click through to those networks' websites (e.g.: 4oD, ITV Player, etc.). Thought that was an interesting tidbit.
Link: http://www.ft.com/cms/s/0/d293bfe2-68c1-11df-96f1-00144feab49a.html [FT article - may have limited access]
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And in Tech, I highly recommend reading this Ars Technica posting on the state of Intel and their GPUs. For techie Econs student, this could be an example of how monopoly leads to reduced incentives to improve the quality of the product (resources being allocated and used inefficiently in the market, perhaps?).
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And in slightly upsetting news for proponents of 'free news online', The Times & The Sunday Times will start charging visitors to their websites, thetimes.co.uk and sundaytimes.co.uk from June onwards - £2 per week, £1 per day. News Corp. (which owns The Times and Sunday Times) said they will also start charging for their other news websites, The Sun and News of the World, later this year. The rationale for such a move is valid, though. They seem to have a harder time making money off online ad revenues, so they will have to move to a charged model to keep the business running. It'll be interesting to see how this pans out, since there are free alternatives to The Times - Guardian.co.uk (I love their iPhone App, by the way), The Independent, Telegraph.co.uk, just to name a few. I love the Times, so I hope Rupert Murdoch works this one out. Don't get me wrong, I hate the guy for what he stands for politically, and for the power he has in the media circles (he owns Fox News, WSJ, BSkyB, The Sun - most read tabloid in the UK, The Times, and News of the World). But The Times has pretty good cartoonists and columnists. Heck, even Clarkson is writing for The Times!
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