Monday, March 16, 2009

Euro Looks Overvalued and other links

Some Commentators feel the Euro is looking overvalued. The Euro is experiencing similar economic downturn to US and UK, but, so far have been reluctant to pursue same reflationary strategies. As the Eurozone interest rates fall towards 0%, the Euro could be subject to the same selling which affected the Pound as interest rates fell. It is debatable whether the ECB would ever be able to bring themselves to implement Quantitative easing.

Bond Prices and Bond Yields. One aspect of quantitative easing was the attempt to reduce bond yields through the Bank of England buying securities. This explains the inverse relationship between bond prices and bond yields

Economic Costs and Benefits of London Olympics. As I evaluated the economic costs and benefits of the London Olympics, I found myself being swayed by non economic factors. Yes, £1billion is alot, but at least it makes a change from losing billions on dodgy banking deals.

Ricardian Equivalence In looking at the impact of government borrowing. Ricardian equivalence claims it doesn't help increase aggregate demand because tax cuts / spending increases financed by borrowing will just encourage people to save because people anticipate future tax rises to pay back debt. However, this theory is of dubious value.

Capitalism beyond the Crisis by A. Sen at New York Times Books. A good look at the current malaise and the need for a wider perspective than just theories of Keynes.

Jon Stewart from Daily Show attacks TV finance Guru's (Video on youtube here)

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