Day care for dogs and the output gap

I am keen on dogs. Recently, I have seen an advert for a special canine toothbrush designed to get rid of the pet’s bad breath, surely a difficult challenge given what dogs get up to. Vans promoting home beauty visits for dogs have proliferated for some time now. A new service being promoted is day […]

Bribing the electorate: new rules of the game thanks to zero inflation

The temptation to believe in the concept of a free lunch is one which has proved irresistible to numerous governments through the ages. Henry VIII, for example, has seized popular imagination once again through the brilliant portrayal of him by Damian Lewis in Wolf Hall. Bluff King Hal is the nickname often associated with the […]

Why is inflation so low?

Zero inflation is trending. The consumer price index in the UK was at the same level in February as it was a year earlier. The reporting of this figure on the BBC website created some unintended amusement, however. The drop to zero, we were told, was “sharper than many analysts had expected”. And what was […]

Bond market yields imply gloomy growth prospects

Very strange things have been happening in government bond markets. The yield on 10 year US bonds is currently around 2.25 per cent. It makes intuitive sense that the Germans, with their longstanding reputation for fiscal prudence, are enjoying a much lower rate, some 0.8 per cent. Similar levels obtain in most of the countries […]

Supply-side growth, not inflation, is the cure to the debt overhang problem

In the year to March 2014, consumer prices in Sweden fell by 0.4 per cent. This has prompted the central bank, the Riksbank, to abandon the normally cautious language used by such institutions. Over the same period, inflation was negative in a further seven European countries, such as Greece, Portugal and Spain. In eight other […]

Forward guidance needed for companies, not consumers

Most of the commentary on the UK’s economic recovery focuses on consumers. Are they taking on too much debt again to finance their spending? Is there a bubble in house prices, as people get excited about bricks and mortar again? Certainly, in terms of its sheer size, spending by consumers is by far the biggest […]

The so-called ‘output gap’: another piece of economic mumbo-jumbo

The concept of the’ output gap’ is central to mainstream macroeconomics. It is not merely of academic interest. The Office for Budget Responsibility (OBR) has a specific requirement to estimate the output gap, which it defines formally as “the difference between the current level of activity in the economy and the potential level it could […]

How sticky is unemployment? Will it take three years to fall?

The views expressed by the new Bank of England Governor, Mark Carney, on interest rates and unemployment remain a hot topic. Interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years. The perception which many people have of unemployment is indeed that it is rather […]