Reading List: Why Economists don’t vote (video edition)

7th October 2011

 

Bank of England governor Mervyn King: 'Worst is over'

On the day that the Bank of England injected a further £75 billion into the UK economy, its Governor, Mervyn King told ITV News that the current squeeze is "unlikely to continue."

 

Years of abuse by powerful led to current crisis: economist

Economist Jeffery Sachs (Reuters) on the Wall Street Protests: "American values stopped feeding into political outcomes because the politicians are really feeding at the trough of the big money. It's the big money and corporate interests that are paying the politicians."

 

U.S. Manufacturing Starts to Return from China

"Manufacturing returns to the U.S." is not a quote you would hear these days given the way globalisation has took off in the past few decades. But John Bussey of the WSJ reports that more manufactures are now choosing the US over China.

 

BOJ Will not Stimulate Japanese Economy

"The Bank of Japan is still sitting on its hands and the main reason is that basically, the economy is bottoming out." Martin Schuluz, economist at Fujitsu Research Institute, tells CNBC why the Japanese economy needs more support but is unlikely to get it.

 

Why Economists Don't Vote

With the US Presidential election a year away, Steven Levitt of Freakonomics explains why economists don't bother to vote. "A lot of economists are embarrassed about it because the rational side of view says that there's no way my vote will be the deciding one."

 

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17 thoughts on “Reading List: Why Economists don’t vote (video edition)”

  1. Gareth White says:

    The BoE have quite clearly abandoned the 2% target since the start of the financial crisis but if this was honestly stated then inflationary expectations would of course increase – that would in turn push up inflation and they’ve got a self-fulfilling prophecy on their hands. Hence the constant prediction of 2% inflation in 2 year’s time and then the “surprise” when it always turns out higher.

    They have appointed themselves demand managers, their tool for raising revenue for this tired Keynesian madness is inflation and they are doing it with no democratic mandate. This is dictatorship by committee.

    1. Anonymous says:

      Hi Gareth and welcome to my part of the blogosphere.

      The problem with misleading people is that after a while they catch on. So you get the inflationary expectations then. But because you have a second-order effect from a loss of credibility and faith in you then you can enter a period where you are worse off.

      When I ask people about their views on inflation (admittedly a small sample) they invariably reply it is worse than we are being told. I blame that on the Bank of England’s behaviour..

  2. James says:

    Shaun, I feel that your comments on the Japanese lending the IMF meet several golden rules for politicians:
    1. The number seems huge and therefore we are doing something substantial to grasp the nettle (or other vacuous soundbite)
    2. It does not involve a spending cut or a tax increase
    3. The IMF is so far from consumers that 99% of the population won’t know anything about it.

    These rules apply equally to
    1. Quantitative easing;
    2. The ECB lending money to bail out banks (which then buy government debt)
    3. Buying in the BT pension fund to reduce debt to GDP ratio
    etc etc

    1. Anonymous says:

      Agreed, they love anything which does not have an apparent cost right now. It is a problem with democracy how we can control such behaviour and hold politicians to account.

  3. Anonymous says:

    As far as I can make out, the IMF created its latest bilateral borrowing system precisely so that the lender could net it out and claim nothing was happening. Japan, like the US, can at least do this without a net interest cost at current rates. For the UK, there is an interest cost of about 0.3 per cent (the assumption being that the money is borrowed in Treasury Bills). 

  4. Anonymous says:

    The post-Budget April UK CPI will be particularly interesting. Last year, it rose by 1 per cent on the month. Do you think that it should rise by less in 2012? If so, annual CPI could fall significantly. However, the current six month inflation rate of 1.1 per cent, which includes January discounts but not April tax rises, seems sure to rise. CPI rose by only 0.1 per cent in the month dropping out. This next six month figure, I suggest, will give us a good pointer to where we really are on CPI inflation.  

    1. Anonymous says:

      Hi Outsider

      According to the ONS the total effect on the CPI from this years UK Budget will be.

      “Effects on the CPI 12-month rateIt is estimated the budgetary measures implemented in 2012/13 will add 0.38 percentagepoints to the CPI 1-month rate. However, because the impact of the measures implementedin 2011/12 was similar (+0.21 percentage points), it is estimated that only 0.17 percentagepoints will be added to the CPI 12-month rate.This impact assessment is based on changes in duties being passed on, in full, to consumersas soon as they come into effect.”Apologies for the bold type which is them not me…However the changes are lagged mostly because of the fuel duty rise which is planned for August leading them to a net effect of +0.02% for April. Which slightly bizarrely is because Vehicle Excise Duty was added to CPI in February.
      It is estimated the budgetary measures implemented in 2012/13 will add 0.38 percentage
      points to the CPI 1-month rate. However, because the impact of the measures implemented
      in 2011/12 was similar (+0.21 percentage points), it is estimated that only 0.17 percentage
      points will be added to the CPI 12-month rate.
      This impact assessment is based on changes in duties being passed on, in full, to consumers
      as soon as they come into effect.”

      However the changes are lagged mostly because of the fuel duty rise which is planned for August leading them to a net effect of +0.02% for April. Which slightly bizarrely is because Vehicle Excise Duty was added to CPI in February.

  5. Anonymous says:

    I see that the IMF has been busy today. From the Guardian live crisis blog.

    2.05pm: Just in — the International Monetary Fund has raised its forecasts for world economic growth, but still believes that the eurozone will shrink during 2012.
    The IMF’s latest World Economic Outlook, just published in Washington, predicted sharp contractions in Spain and Italy this year. It also warned that the risk of an escalating eurozone debt crisis remains, and that the global economic recovery remained fragile.
    For the global economy, the IMF now expects growth of 3.5% this year (up from 3.3%), and growth of 4.1% in 2013 (up from 3.9%).
    It expects the eurozone to shrink by 0.3% this year, with Italy contracting by 1.9% and Spain by 1.8%.
    More details here.

    I recall Shaun that in your analysis of GDP numbers you felt that such moves (3.3% to 3.5%) were meaningless. Is that right? It does not seem much I have to confess.

    1. Anonymous says:

      Hi Josephine

      The change in growth in the global economy is an example of spurious accuracy as it is only 0.25. If only their forecasts were remotely that accurate, if only..

  6. Patrick, London says:

    Have we got to a point that we need inflation to get much worse, and for the BOE to be proved so utterly wrong that the senior figures do resign, before our righteous anger will be assuaged? 

    The sickening knowledge is that instead, we will see either of the following:
    1.)A very, very slow reduction to the 2.0% figure, with blips all the way down, and new indices threatened at every turn. (There’s lots of letters of the alphabet to append to CPI and RPI. Lots of fun to be had there). Ultimately, external unforeseen factors (Britain topping the Gold medal table?) being the main reason for the improvement, but Posen and King taking the credit.

    OR

    2.)A creeping up of inflation, and some pathetic pronouncement of 4.0% being the new 2.0%, due to unforeseen paradigm shifts in economic theory. Well done everybody, well done.

    It all seems so horribly inevitable, as these vested interest b***ards hold on to their jobs and index linked pensions.

    I can’t bear the thought of them claiming to have been proven right, whitewashing every broken promise and contradiction, but does anybody have an alternative outcome to help me sleep tonight.

    1. Anonymous says:

      Hi Patrick

      If Adam Posen has any honour then if his promise about inflation in the summer of 2012 does not happen then he should not stand again as he promised. Of course we do not know what inflation will be then but he needs a real stroke of luck..

      As to your scenarios I think that number 2 is much more likely. Various organisations such as the US Federal Reserve and the IMF have floated the idea of a higher inflation target.

      1. Patrick, London says:

        First let me just say…… Eject!

        So what are the long term ramifications of a 4.0% target rate. How does a country that seems to have only one industry of significance left create the money needed to pay for wage growth that keeps up with this increase? How do we pay for all those index linked pensions, and benefits payouts?
        Are we hoping for Falklands oil to save us?
         
        Export sales of jubilee memorabilia?

        One Direction?

        1. Critic Al Rick says:

          Precisely! Down.

    2. Critic Al Rick says:

      Sorry Patrick; the longer this can kicking goes on the worse the Depression will be when it is truly disclosed.

  7. MickC says:

    So, what we have-and will continue to have for a long time, is stagflation. Back to the future indeed-or is it Life on Mars?

    1. Anonymous says:

      I doubt if it will be see as Golden Years or that the Bank of England will be Heroes (with apologies to one D.Bowie).

  8. Auyhiu says:

    Well if you have inflation at 2% over 20 years, £10 becomes £14.86. At 4% the same £10 over 20 years becomes £21.91 so a very significant difference.

     

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