Market Concentration Illustrated - Banking Brands after the Crunch

   A terrific illustration here of how the global banking market has changed in terms of its market shares and concentration ratio recently.
This super graphic from Banking Brands shows the brand values of all the major banks by territory, and their market shares and value globally. Interesting to see how small the Middle eastern banks still are + the rise of Santander after its acquisition frenzy in the last couple of years.

Source: tutor2u.net/blog

Cheers,
John A62

PS Click on the image to enlarge it.

Life Lessons From an Ad Man

   Brilliant video on behavioural economics. Rory Sutherland amuses the audience in Oxford with his talk in which he touches the matter of advertising, re-branding and intangible values. Not only funny, but also very, very interesting. Definitely worth a watch. Available with English subtitles.

Cheers,
John A62



   PS In 11th minute he mentions 'Nudge' by Richard Thaler and Cass Sunstein :) for a brief reminder, click here.

Week Five: How to Pick Stocks?

Hi there,

   This time we had a special guest. The economics teacher, the philosopher, the gardener – the one and only, Mr. Jerome Lee. Besides that, he’s pretty good in shares/stock market thingy. So here’s a small recap of today’s meeting,

   1) Begin with sorting all the shares into appropriate industries, e.g. banking, insurance, mining, pharmaceuticals etc.

   2) Then look at the PE ratio (read more here), which basically tells you how much market confidence there is in a particular company. High ratio indicates stable growth and confidence, whereas low ratio signals low performance and no confidence. Keep in mind that’s just a huge generalization.

   3) And that’s that – later on we discussed options (read more here), contracts between buyers and sellers that give buyers the right, but not the obligation, to buy or to sell particular assets (theunderlying assets) on or before the options’ expiration time, at agreed price.

   4) Jerome also briefly mentioned that ‘in 2010 there will be no growth, stock market will go down again, whereas properties won’t pick up in prices until 2017’ (quoting for future references, I personally think the opposite will happen)

   5) And Jerome’s top tip: look at what is happening to the USD. Basing on the performance of this currency, made your decisions.

Cheers,
John A62

Week Three: Corporate Social Responsibility

Hi there,

   CRS, i.e. what big boys have to do to make small boys happy. CSR is a must-have for nearly all large multinational companies. They are responsible for the impact on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Some key benefits include,

   (i) Human resources – easier to recruit employees
   (ii) Brand differentiation – build customer loyalty based on ethical values; positive press coverage
   (iii) Employee loyalty – staff staying longer, reduces the costs of recruitment and retraining
   (iv) Employee efficiency – more motivated and more productive
   (v) Relations – improvement of relations with local authorities, government and customers
   (vi) Costs - Reducing resource use, waste and emissions doesn't just help the environment - it saves money, too.

However, there are several downsides as well,

   (i) Priorities – business are too busy with current economic downturn, hence they have to focus on core business
   (ii) Opportunity cost – no time for CSR; distraction
   (iii) Window dressing – CSR just to look good; give good impression
   (iv) Take it over – governments want CSR to take their places as a watchdog over companies

   Click here to download Powerpoint presentation made by Sam and Jitesh (both A52).

Andy Quin, Bellerbys College London principal, gave a speech about school's CSR. Will try to upload his presentation somewhen.

Cheers,
John A62

Book club. 'The economist of the month' award?

Hi everyone! From October we are starting to run a book club. Everything you have to do is to pick up any book you are interested in from the following list, read it and write a review (your opinion, your critical judgement and advice for another students). It is due to November, 1st.

THE BEST REVIEW WILL GAIN AN AWARD 'ECONOMIST OF THE MONTH' (which would perfectly suit your personal statement). Furthermore, be active in different sections of the economics club (economics pub, essay, etc.) in addition to the book club.
If you have questions, ask Rene (economics teacher) or Tatiana (A62).
Thank you.

###All the books you can find in the school library in the Economics section###

1. The no-nonsense guide to Globalization. Wayne Ellwood.
2. The Industrial revolutionaries. The creation of the modern world 1776-1914. Gavin Weightman.
3. The age of turbulence, Alan Greenspan.
4. Globalization, a very short introduction.
5. Vital signs. The environmental trend that are shaping our future. 1999-2000, Lester R. Brown, Renner, Halweil.
6. The Blue Revolution. Land use and Integrated Water Resources Management, Ian R. Calder.
7. Values for the environment. A guide to economic appraisal. J. T. Winpenny.
8. Using the financial pages. Romesh Vaiti Lingam.
9. UTOPIA. Sir Thomas More.
10. China shakes the World, the rise of a hungry nation. James Kynge.
11. The poverty of ‘Development Economics’ Deepak Lal.
12. The State we’re in. Will Hutton.
13. An inquiry into the Nature and causes of THE WEALTH OF NATIONS. Adam Smith.
14. The ascent of money. A Financial History of the World. Hiall Ferguson.
15. Principles of political economy. J. S. Mill.
16. Freakonomics. Steven D. Levit & Stephen J. Dubner
17. Addressing Poverty. Indian NGOs and their Capacity Enchancement in the 1990s Ranjani K. Murthy
18. The economic naturalist. Why economics explains almost everything. Robert H. Frank

Week Two: Global Resources

Hi there,

   A quick recap from yesterday’s meeting – 40-minute documentary about the history, current stance and future prospects / threats regarding global resources. How should we manage them in order to achieve a sustainable growth? How can rich countries help the poorer ones? Should they? What are the possible dangers arising from inadequate (ab)use of the world’s resources? These and other questions were gradually being answered during the process of film watching. Afterwards, 20 minutes of discussion in four groups.

Here’s what they had to say,

Group 1

Q. How can poorer countries be influenced into preserving their natural resources?

A. Um, maybe teams of experts to be sent to those countries? Can help at the local, regional and national level – where to allocate what at optimum quantities using efficient technology. Just an idea.

Q. How can we better manage our own resources?

A. ( i ) group of experts set by government
    ( ii ) authority to impose sanctions and fines on firms/institutions that are maintaining activities which cause too much of environmental damage

Q. Do you consider resource management to be a vicious or virtuous cycle?

A. This is a question of finding the perfect equilibrium between growth (development) and environmental preservation. Depends where you find that point.

Q. Why are some countries less inclined to combat climate change; how does this affect other countries who are trying to make improvements?

A. ( i ) incompetent government
    ( ii ) corruption
    ( iii ) financial restrictions -> opt for development -> betterment of society -> no funds for green technology

    ( i ) disincentive for improvement-seeking countries -> wastage of efforts

Group 2

Group 3

Group 4

Representatives of remaining groups are more than welcome to present the groups' views. Yup, can post the answers as a comment to this post, for instance.

Cheers,
John A62

Week One: Introduction to Economics Club

Hi there,

   First meeting of school year 09/10 is behind us. The attendance was shockingly high, 30+ people crammed into a tiny 25-30m² classroom. Oh wells, at least was warm. Dokey, Melina – this year’s chairlady, started off with presenting each section of the Economics Club. Will do the same,

   Blog – run by me. I try to put some interesting (normative statement) links, news and videos. Reviews of economics publications to be expected from time to time. Anyone interested in reading any of the books mentioned on the blog, feel free to contact me. Aye, might post some exemplary exam answers for A-levels as well.

   Forum bcleconomics.lefora.com – administrated by me and Elena. Loads of revision materials available + some sections to discuss economics related topics. Not really active but hopefully with time will attract more users. Shall see.

   Public lectures – Linura is responsible for informing you, me, us when and where there will be a lecture worth attending. Personally, already have an eye on some of them. Important point – it’s for free. Usually held in LSE. Rarely in UCL. For a leaflet with all the lectures in Sept-Dec 2009, click here.

   Pub Economics – Aigul’s and Mika’s joint baby. They came up with an idea to have economics conversations while sipping a pint of beer. The topics usually hover around areas not directly related to A-level syllabus, sometimes not all.

   Student Investor Challenge studentinvestor.org – one of the competitions I look forward most to. Teams made up of four members compete against 10,000 other teams in UK-wide challenge in which the aim is to invest 100,000 of virtual money and after three months finish with the highest possible profit. Know nothing about shares/stocks/securities/bonds/trusts. Will be fun. Oh, might work as an incentive – a trip to New York + cash is up for grab.

   Essay competition – held jointly by Bellerbys Colleges from London and Oxford. Every now and then there will be a set topic for both schools, fixed amount of words, one prize. Winner takes it all.

   Book Club – the new thing, run by Tatiana. The concept is simple - you read, you write a review, we publish it, people read your review, people read the book you have read. And so on and on and on. More details here.

   That’s it for now. Next week – Introduction to supply and demand. Monday 5PM, we’re moving to 222-223, be there.

Cheers,
John A62

'Freakonomics' by Steven Levitt and Stephen Dubner

Hi there,

   Much has been said about this book. Despite that, still decided to share some of my thoughts. At first there were only some random opinions heard here and there, nothing truly shocking though. Generally – ‘a book for dumbies’, ‘quasi-economics’, ‘not much economics in economics’ and so on. And have to partly agree with such views. I would put ‘Freakonomics’, written by Steven Levitt and Stephen Dubner, on the same shelf as Tim Hardford’s ‘Undercover Economist’ or Steven Landsburg’s ‘The Armchair Economist (even though I haven’t had a chance to read the latter one yet).



   A simple piece of reading for wider publicity, a relaxing lecture after a tiring day. Yes, it may dazzle you at times, however that will likely be caused by its undoubted charm and funniness than a massive amount of economics theory. Authors opted to take a rather different approach in presenting the context. What they did, was to form a list of several questions, unusual in its nature, such as ‘what do schoolteachers and sumo wrestlers have in common’? Common sense tells us nothing, but as you can surely guess, Levitt and Dubner obviously came up with something. Readers will definitely be astonished by the process of linking thoughts one to another, carefully led by the pair of economists. Have to admit that there is quite a lot of data and statistics in use, but in the end, that’s the only touch of economics. No models, no graphs, no extraordinary concepts – everything is kept as simple as possible. And maybe that’s why ‘Freakonomics’ proved to be so successful? Very likely to be so.

Rating: 6.5/10

Cheers,
John A62

PS Thanks to Chik for gifting me the book.

'Nudge' by Richard Thaler and Cass Sunstein

Hi there,

   For the first time I actually did read the book I was awarded. Quite remarkable I have to say, as I am generally used to receiving either heavy readings about Polish history (boring) or not-in-depth encyclopedias for children aged 6-10. This time around Bellerbys funded for their Student Ambassador a book that he is extremely pleased to be given.



   ‘Nudge’ written by Richard Thaler and Cass Sunstein is a 250-page lecture focusing around a subject of behavioral economics. Everyone seems to think that economics is only about maths, models and equations. Well, that is very much true, but after all, it is ought to be social science. Social, that is, um, correct me if I am wrong – for society, isn’t it? The authors are trying to convince us that little, almost unnoticeable actions can lead to more than significant changes. They refer to those minor actions as ‘nudges’. How many times have you found yourself denying your own opinion and opting to follow the herd? Ready to order chicken, but everyone seems to order cod, well, don’t want to be odd one out, do you? And how many times have you found yourself in a state of complete inertia? Too lazy to bother yourself about choosing on your own, let’s just pick a default option. Default rarely does mean the best. No worries though, as a human you are destined to make poor choices, at times. It’s only up to you how often that will occur. Thaler in cooperation with Sunstein explain how you can change your life with very little fuss and effort. Change for the better, obviously. Sounds like a good deal to me. Hope this little piece of review worked as a nudge for you. If not, then well, at least I did try, right …?

Rating: 7.0/10

Cheers,
John A62

Global Capital Market (DVD)

Hi there,

   I am pleased to present you a second (out of four) part of Global Economics series, which focuses on global capital market. Oh wells, better to paste author’s description,

‘We are shown the balance between the benefits and the downfalls of financial integration. Many of the essential key terms and phrases are broken down into manageable pieces, with evidence to confirm their meaning and consequences. There are certain pivotal moments in history that are assessed, such as the Mexican peso crisis; the aftermath of this can be felt all over the world. We are shown the theories that have evolved from the capital global market and patterns that already exist from events that have happened.’

   Yup, excited, right? I knew you would be. So, following a structured pattern,

| Part I | Part II | Part III | Part IV |

(i) a few computer geek video specifications:

Format         : Windows Media at 1 413 Kbps
Length          : 368 MiB for 36mn 22s 850ms

Video            : WMV2 at 1 236 Kbps
Aspect          : 320 x 240 (1.333) at 29.970 fps

Audio           : MPEG Audio at 112 Kbps
Infos            : 2 channels, 44.1 KHz

(ii) a couple of screenshots:



(iii) a quick what-to-do guide:

a) download all parts (I to IV)
b) download and install WinRar (click here)
c) right-mouse-click on one of the files, 'extract files', OK and voilà - it's done.

(iv) watch online:

Hope you will have a jolly good time. Enjoy.

Cheers,
John A6

PS Sorry for low quality of the online video, had a few obstacles to overcome. Download to experience a higher quality.

The Undercover Economist by Tim Harford

Hi there,

   Yup, yet another book review. This time took a closer look to a fairly popular writing by Tim Harford – ‘The Undercover Economist’. It’s one of those recently popular ‘eco-books for dumbies’. And have to admit that there is really something unique that make them reasonably easy to read publications.



   It might be this simple language. No sophisticated terminology, no confusing diagrams, no complex anagrams. You will definitely not find FSA, CDOs or NIESR. Maybe GDP, but very seldom. You won’t feel overwhelmed by a vast amount of data. To be honest there is not much information in the book itself. Taking the juice out of it, you will have a bit about scarcity, perfect market, externalities, globalization, moral hazard and a not in-depth analysis of China’s performance in the last 50 years. Um, relatively modest as for 250 pages. What make those quasi-economics books so appealing to wider public is the fact that the explanation is extremely, extremely gradual, you might even feel insulted at times. The author usually starts with a basic example, then jumps, very smoothly, to a more advanced example, obviously applicable to real world, e.g. coffee bars, second-hand card market, afterwards he names the theory behind the examples, yet he annoyingly sticks to a simpler expression, e.g. ‘adverse selection’ – ‘lemon market’ (gotta read to understand why) and that’s basically it. The process keeps repeating and repeating. Might sound awful, however, it wasn’t so bad. Enjoyed it. A little relaxation while was revising for AEA. Read on The Student Room that it can be helpful. Wasn’t at all, but who cares. This book is rather not meant to be very scientific and rich in information. It is more targeted to an average Joe, who knows nothing about economics (not that I do, huh). And, speaking frankly, it might have done the trick. But that’s just my opinion. Yours might differ. There’s only one way to check whether it would – you have to read ‘The Undercover Economist’ by yourself.

Cheers,
John A6

China in times of economic crisis

Hi there,

   AEA Economics is coming and as a part of my preparation I have recently been pretty much into BBC videos. Few days ago came across quite an interesting two-part documentary series of Paul Mason about China and how it is coping in these tough economic times. Definitely worth a watch. Without further ado,

(i) a trip through China's economic crisis - part one:



   'Part One of Paul Mason's journey across China to see the effects of the economic crisis on the world's biggest exporter.'

(ii) a trip through China's economic crisis - part two:



   'Paul Mason continues his journey through China by train and car to see how the country is being affected by the world's economic crisis.'

Cheers,
John

Economic Development (DVD)

Hi there,

   This time bringing something new. Quite a while ago Rene managed to purchase some economic DVDs and it’s only now that I kind of remembered her asking me to try and do some little tweak-mix to upload the videos on the internet. And ... yup, did so. So, here it is, first part of the Global Economics series – Economic Development.

| Part I | Part II | Part III |Part IV |Part V |

   422 MBs of pure economics knowledge. Enjoy.

(i) a few computer geek video specifications:

Format         : Windows Media at 1 407 Kbps
Length          : 422 MiB for 41mn 57s 417ms

Video            : WMV2 at 1 230 Kbps
Aspect          : 320 x 240 (1.333) at 29.970 fps

Audio           : MPEG Audio at 112 Kbps
Infos            : 2 channels, 44.1 KHz

(ii) a couple of screenshots



(iii) a quick what-to-do guide:

a) download all parts (I to V)
b) download and install WinRar (click here)
c) right-mouse-click on one of the files, 'extract files', OK and voilà - it's done.

UPDATE (19th June)

(iv) watch online:



Cheers,
John

'What Happened?' by Hugh Pym and Nick Kochan

Hi there,

   Another story from my life – hope you guys don’t mind. So, it was 23^rd May, the very first morning after graduation ball. Was out for brunch with two of my friends. After a relatively fine meal in Tai Won Mein we were on the way back, and then … I thought I might have a visit in Waterstone’s, as had already finished ’The Return of Depression Economics …’ (don’t remember? click). Browsed through the bookshop shelves for a while (obviously in Economics section) and, um, found this:



   A 115-page long book written by Hugh Pym, a BBC Economics Editor, and Nick Kochan, a Financial Times journalist. Those two gentlemen combined a Q&A list regarding the issues of the current economic climate as well as a short, yet detailed, description of the events that led to the present situation. The book was written in a rush, published in November 2008, so some of the data might not be totally up-to-date, as the authors tried to provide a wider public with a quick update of what has recently happened. Still I would strongly recommend giving it a try. Language should not be an obstacle, as ‘for the intelligent lay reader with no prior knowledge of economics, this is an indispensable, refreshingly jargon-free guide to the shocking events of the past year – and to what future may hold’. Neither price should be an obstacle – I am more than sure that every of you can afford to spare £7.99 for a piece of invaluable knowledge. Halfway through now, and so far so good. Perfect way to relax in between revision sessions (sadly I’m not kidding).

   Yup, so that’s it. You guys know where Waterstone’s is, don’t you? (click)

Cheers,
John A6

My Essay Competition Entries

Hi there,

   Every now and then, actually more like every two or three months, Economics Club runs an essay competition for everyone free to enter. Thought might post my little scribbles. Again, in hope to enrich your vast economic knowledge.

   (i) Does a free market equilibrium exist? - click - September/October 2008

   Ah, my first ever economics quasi-essay ‘thing’. Not much text, several copied graphs, bit of research. All of that after four weeks of Economics. Not bad. Managed to get second place. Out of three participants. Heh.

   (ii) Is this world essentially a centrally-planned economy? – click - November/December 2008

   Remember writing it, got really into Economics back then. 10 hours of research + reading + writing + editing = a link above. Good times. Enjoyed that. At least got a bit of understanding what the topic was roughly about – AS stuff. Ah, almost forgot to mention – got first place. Still, I think the number of participants did not exceed ten. Maybe not even five. Who knows? I don’t, Rene does though.

   (iii) Should mortgage lenders be nationalised? - click - February/March 2009

   A joined topic for Bellerbys London and Oxford. All I know is a student from London got the best essay. Who exactly that person is – have no idea. Just a feeling it might be a Vietnamese born in Poland. Just a feeling though. Anyway, at first was pretty much discouraged when read the topic. Didn’t have a clue what I could possibly write. But still managed to create something. Why? Simply because was hoping for everyone to be discouraged and would end up being the only participant. It wasn’t meant to be so though. Um, as for the writing, I think research this time took like 60-70% of time. Without a help of my invaluable friend – Google – this task wouldn’t be possible. Thank you. And the rest was just purely summarising what I had previously read.

   Yup, that’s it – my sentimental look back into the past. Hope you enjoyed it.

Cheers,
John A6

Recession Basics

As usual – Hi there,

   Information asymmetry – a situation in which one party in a transaction has more or superior information compared to another. This often happens in transactions where the seller knows more than the buyer, although the reverse can happen as well. Potentially, this could be a harmful situation because one party can take advantage of the other party’s lack of knowledge.

Source: investopedia.com

   Um, yeah, right. We all do know that. Basically, one party knows more than another. However, today, I would like to make the information more approachable for all of you. The fuzz about economic downturn has gone down, though, it is still very well present. For those of you, who have slept through all these months – I have good news. A summary of the past events. A dictionary of all the ‘fashionable-economic’ terminology. Numbers and dates within one click. Brought to you by BBC, not me, by the way.

Timeline: Credit crunch to downturn - click

   A look at how it all went wrong. What were the causes? Consequences? Actions undertaken? Results? Where do we stand right now? No one actually knows the answer for the last question, though for the former, there should be. And there is.

The layman's finance crisis glossary - click

   Mortgage-backed securities? Ponzi scheme? Rights issue? Some of these words you might have already come across, yet still have no idea what do they mean. No worries, this little dictionary with all the economics and business jargon shall explain you what each individual term mean in an easy to understand language. I swear. It won’t hurt. Um, maybe just a bit.

Global downturn: In graphics - click

   Millions, billions, trillions. We all can get easily confused while being faced with such a huge amount of numbers. In a link above, all the most essential bits are mentioned. No meaningless figures. Just what you really ought to know. Bit out of date (especially GDP and national debt forecasts), however still very useful.

Recession tracker - click

   Every month you hear about changing interest rate or rate of unemployment or GDP projection or all of them and many more. This little, yet extremely practical link will give you a great insight look into what is really happening, and what the current statistics are.

   Heh, so that’s it. Hope you really do have a look at those sites. And to finish off, a little quote,

‘Stupidity isn’t the lack of knowledge. It’s the wastage of it.’
   ~Jan Hoang Xuan

   So don’t be stupid and don’t waste the knowledge that is just in front of you. Convinced? Fine, now go and have some read. I will have some, too.

Cheers,
John A6

PS I know the quote was lame.

Unit 2 Specimen Paper - My Answer

Hi there,

   3^rd June. Economics exam day. Bet everyone is preparing day and night for that day. My class did the Unit 2 specimen paper a while ago, so thought I can post my little scribbles with a hope that someone will learn from my mistakes and enrich his/her knowledge. Off we go.

   First things first though. I would recommend you to try and do the paper by yourself, if you haven’t done it yet. Unit 2 consists of one data response question out of a choice of two. You can download question 1 from here and question 2 from here. Mark schemes are available here and here.

   And the interesting part now. My response to question 1 - click, and my response to question 2 - click. Huge credits go to Jerome who marked my answers and left some invaluable comments.

   Yup, so that’s it. Have a nice read. Hope you find this little exercise helpful.

Cheers,
John A6

Revision Links

Hi there,

   Exams coming, aren’t they? I know some of you guys are feeling extremely relaxed, whereas some are experiencing sleepless nights due to the accumulated amount of stress, tension and anxiety. Luckily, I don’t belong to neither of these groups. To help you with a revision part, I thought that posting links that are helping me with going through the economics syllabus might be a good idea. Dunno, anyway, decided so. Um, yeah, so here they are:

   Tutor2u (click) – one of the most known websites for AS/A2 students, highly recommended.

   Tutor2u Blog (click) - guys from Tutor2u are writing pretty good articles about current events that are more or less linked to the theory part covered in textbooks.

   Economic Student (click) – another site that can come with some good revision bits. Recently created, though already has a lot entries.

   Economics Help (click) – a blog of an A-Level Economics teacher. In his entries he tries to further develop and apply to real world situations knowledge obtained from the textbooks. Easy to understand language, no worries.

   The Student Room [Economics; A-Levels; Economics, Business and Management] (click ; click ; click ) – personally, one of my favourite sites, bookmarked long time ago. Can post questions and queries, and literally few minutes later, an answer can be expected. Good way to improve your writing skills. When I spot a question that I can give a reasonable reply to, no hesitation, scribble few sentences, post the message, wait for other responses and see in which ways can my answer be improved next time. Quality way for economics nerds to spend time.

   Extras:

   Economic theories (click) – a website suggested by Rene. Quite a lot of additional information about economic theories and thoughts. History, biographies, explanations. Recommended reading for those taking AEA Economics in June (23rd June, waaaah! It’s coming!)

   BBC News Economy (click) – fresh and daily updates news concerning round-the-world events. Special sections for the most important ones, e.g. global recession, housing market, budget 2009. Some videos and statistics available, too. Help to keep in touch with the world, especially while being a non-TV-watching person (um, with occasional exceptions for EPL and Champions League matches).

Hope that helps. Happy revision.

Cheers,
John A6

PS Saturday afternoon, FA Semi-final match Arsenal-Chelsea in less than an hour, and you guys know what? I’m not going to watch it. Simple because I’m stuck with psychology revision. Considering it as my hardest subject. What’s even funnier, Psychology is considered to be a soft subject. Or semi-soft. No difference. Heh. And nah, don’t think that was my personal rant or so. Simply a real life example of opportunity cost – um, the cost of the next best alternative forgone, or something like that. So sad the cost forgone must be one of the best matches of this season. Dokey, off for now. Once again, happy revision.

The Return of Depression Economics and the Crisis of 2008 by Paul Krugman

Hi there,

   Long time no writing. Few weeks ago at the Heathrow Airport while waiting for my flight to Poland, well, to say the least, was bit bored, so decided to walk around. After a while spotted a bookshop. ‘Cannot be any worse, can pretend to be a little, nerdy bookworm’ yup, that was my first thought. Immediately found Business section and … um, there was one book that sparked my interest. Want to see the cover?



   Not bad. And the content is even better. Author of the book – Paul Krugman – is a 2008 Nobel Laureate in Economics, so I reckon he has to know a tad about economics. He tries to take a deeper insight look into economic crises that swept across Asia, Russia and Latin America in 1990s. Could we have prevented the financial crisis of 2008? Could the previous happenings have been considered as some sort of warnings? What lessons can be learnt? Answers to these and many other questions can be found in this brilliantly written book. Krugman uses a language that is not packed with loads of jargon and complex economic terminology. Instead, his thoughts are converted into sentences widely understood, as after all, economics is a social science, for people in general, not only economists. Definitely a good read for A-level or Business Foundation student. Currently in the middle of reading, though can already say that it was a worthwhile purchase. £9.99 worth of investment in exchange for lifetime, invaluable knowledge. Not a bad deal. Though, you can make even better one, I found the same book on Amazon for £6.59 + free delivery (click) and as a bonus, you can look into exemplary pages of the book (click). This should eventually convince you to have a read.

Cheers,
John A6

RES Young Economist of the Year 2009

Hi there,

   Just thought you might want to know that Royal Economic Society launched (quite a while ago actually) an economics essay competition with a following topic to write about:

‘Are economic recessions inevitable?’

   Indeed, a very good question. More information to be found on the poster,




Click HERE to download A4 size poster.

   Feel free to ask for any suggestions, corrections and tips from economics teachers at Bellerbys College London. Don’t ask for too much though, it is ought to be more of your work than theirs.

Struggling to start?

   Click HERE for suggestions on how to research for RES competition. Good luck.

Cheers,
John A6

PS If being a 2009 Young Economist of the Year is not enough for you, then may I emphasize what you should have already known from the poster – the main prize is £1,000. And an engraved trophy.

Theories of Money Demand and Supply

   In economics, the Theory of Money Demand stresses on the positive relationship existing between the general prices or the nominal expense rate and the total amount of money.

Historical Evolution of the Theory of Money Demand:

   The Theory of Money Demand is considered the brain-child of the famous Polish astronomer and mathematician, Copernicus. In the hands of the Jean Bodin, the noted economist, the theory progressed immensely in establishing the relation between gold and silver imports and rise in the market prices. In the Quantity Theory of Money, the “Equation of Exchange” which substantiates the relation between the supply of money and the value of cash transaction was first affirmed by David Hume, the well-known philosopher and later expanded by the renowned British political economist, John Stuart Mill. Between 19th and 20th century, other prominent economists like Irving Fisher, Simon Newcomb and Alfred de Foville further developed the theory, offering it the present form.

   There are basically three theories to the demand for money. They are the Classical, Keynesian and the Quantity Theory of Money. Each of them may be discussed under the following heads:

Classical theory of money demand:

   The main concern of this theory is to analyse how money may affect the Aggregate Demand (AD) of goods and services in the economy. According to the Classical Theory the AD is more or less stable . Shifts in the demand and the supply of money cause changes in the AD and the general price level. This theory does not explain the different components of AD.

Keynesian Theory of Money Demand:

   As opposed to the classical theory the Keynesian theory decomposes money demand into Consumption, investment, Government spending and trade balance.

Mathematically,

   AD = C+I+G+(X-M) where C = Consumption of currently produced goods and services

I = Investment

G = Government Spending in the currently produced goods and services

X = Export

I = Import

   According to the Keynesian Theory of the demand for money, the Aggregate demand is highly unstable due to changes in business and consumer expectations. Money does not play a vital role in the determination of the general price level and the Aggregate Demand of the economy.

Quantity Theory Of Money

   The Quantity Theory of Money can be explained by the equation :

MsV = PY

or Ms = (Y/V) *P

Where Ms: Supply of Money

Y : Income Level

V: Velocity of Money

P: Price Level

   This equation implies that keeping the velocity of money and the income level constant, changes in the supply of money would cause changes in the general price level.

   Money Supply Theory in macroeconomics refers to the study of the quantity of money available at the hands of people within the economy to buy goods, services and securities. The interest rate is the value of money over time, that is the price paid for acceding payment of monetary debts. These two are inversely proportional as the supply of money increases the interest rate decreases. The equilibrium at the money market is reached when the quantity of money demanded and supplied becomes equal to the rate of interest.

   Money involves both coins and banknotes, therefore the supply of money in an economy will consist of both the supply of banknotes and coins. Precisely the concept of money supply involves the sum total of all electronic, credit-based bank deposits balance accounts along with the printed-paper notes and minted coins. According to the principle, money is a medium of transaction that is utilized in settling a debt. Money supply can take place in varying measures. The narrowest measure counts only liquid money while the broader measure takes into account the form that deals money as a store of value. The situation of inflation occurs when the supply of money increases to an extreme level.

Role of Central Bank in Supply of Money

   When the Central Bank is ‘easing’ the money supply increases and when it is ‘tightening’ the money supply decreases. In the condition of easing more liquid money is available for the private banks. During the condition of tightening the liquid money is pulled out of the private banking sector. The Central Bank also creates new reserves that let the banks lend out more money. Then through the process of ‘money multiplier’ the loans and bank reserves increase. According to Mises the state of the art monetary policy of money supply expansion runs the risk of undermining the value of currency. Mises endorsed the view of formulating a monetary policy that is different from the state of the art monetary policy. He aspired to minimize the risk of devaluation and create a free society.

   Source: http://www.economywatch.com/economics-theory

What is Quantitative Easing?

* Quantitative easing (QE) is what economists call 'turning on the printing press'.

* Its aim is to get money flowing around an economy when the normal process of cutting interest rates isn't working - most obviously when interest rates are so low that it is impossible to cut them further.

* The central bank does not actually print money, it simply increases the size of banks' accounts at the central bank, known as 'reserves' giving the banks the boost.

* Bank swap their securities such as government debt, mortgage-backed securities or even equities, for these reserves.

* Theoretically the increase in the money balances held by the banks lead to an increase volume of lending.

* Experts differ as to whether policy will work, but say that with interest rates already at one per cent and the economy in recession, the BoE has no other ammunition left.

* The Bank of England's MPC will vote on QE on 12th March and is expected to start the process very soon.

Video: QE explained in 108 seconds - click.

UK Economy Statistics

Thought that posting some statistics about UK to see how it is currently performing would be a decent idea for the first entry. So, off we go.

CPI 2008 - 3.8%

CPI (17th Feb 2009) - 3.0%

Bank of England interest rate (5th Feb 2009) - 1.0%

Unemployment rate 2008 - 5.5%

Unemployment rate - 6.3% (+0.4% in Q4 2008)

GDP 2008 - $2.787 trillion

GDP (PPP) 2008 - $2.279 trillion

GDP real growth rate 2008 - 1.1%

GDP per capita (PPP) 2008 - $37,400

GDP composition by sector 2008 - agriculture: 0.9%

industry: 22.8%

services: 76.2%

Investment (gross fixed) 2008: 16.7% of GDP

Fiscal year - 6th April - 5th April

Budget - revenues: $1.107 trillion

expenditures: $1.242 trillion

Current account balance 2008: -$72.54 billion

Exports 2008 - $468.7 billion

Imports 2008 - $645.7 billion

Think these are the most important ones. Hope you will find them useful. Feel free to leave any comments if anything has sparked your mind while browsing through all these numbers.

Cheers,

John A6

Books

Wishing all Bellerbys students a happy new year!

Apologies for the long hiatus, as the past term has been extremely hectic.

The Bellerbys London Economics Club has enjoyed great success, with participation in our Economics Essay Competition extending to our Oxford and Cambridge counterparts, and we'll be looking forward to more contributions from all our students. Results and winning essays for the past 2 months will be posted on the blog very soon.

As the January exams come to an end, the Economics Club will once again resume its fortnightly visits to various public lectures held in London, and kindly check the blog regularly for updates on them.

To end the post, I will add a couple more book-recommendations:

1. The Strategy of Conflict - Thomas C. Schelling

2. The Return of Depression Economics and the Crisis of 2008 - Paul Krugman

Once again, wishing all a happy new year!

Chik A52

The Trap: What Happened to Our Dream of Freedom

The Trap: What Happened to Our Dream of Freedom

http://www.youtube.com/watch?v=SIXDMycMYsw&feature=PlayList&p=8D2965A956D903F5&index=0&playnext=1

This is a BBC documentary series by English filmmaker Adam Curtis. It began airing on BBC Two on 11 March 2007. The series explores the concept and definition of freedom, specifically, "how a simplistic model of human beings as self-seeking, almost robotic, creatures led to today's idea of freedom."

In the first episht. The pode, Curtis examines the rise of game theory during the Cold War and the way in which its mathematical models of human behaviour filtered into economic thougrogramme traces the development of game theory with particular reference to the work of John Nash, who believed that all humans were inherently suspicious and selfish creatures that strategised constantly. The series goes on with another 2 episodes, and it covers a broad range of disciplines which span from psychology to economics. Many prominent economists of our time have contributed to this documentary, namely; Thomas C. Schelling, Friedrich von Hayek, mathematician John Nash, and so on.

I urge all of you to check out this documentary, as we continue to pursue and explore the actual meaning of freedom in modern society.

Chik A52