Category: MacroEconomics

The Phillips Machine

Posted on by Rhys Williams

Whilst at a Cambridge Summer School I had the opportunity to see the Phillips Machine in operation and was amazed at the engineering feat as well as its economic applications. The machine (also known as the Monetary National Income Analogue Computer or Moniac) was created by the New Zealand economist William Phillips. There is believed to be 12 machines built, and Cambridge is one of a few to have a working machine after it was restored by Allan McRobie. The machine uses water and hydraulics to show the macroeconomic situation of the country with variables such as marginal propensity to consume and government spending being able to be adjusted by twisting a valve to control the amount of water flow. [...]

Japans lost decade

Posted on by Rhys Williams

Originally began in the 1990s following the collapse of a stock market and property bubble. Inflation is virtually non-existent in Japan and there has been deflation over the years. This has deterred borrowing and spending as people think if they wait to spend they can get goods cheaper, borrowing also becomes more expensive if deflation is occurring. The Bank of Japan has been easing credit until inflation reaches 1%. The BOJ intends to inject some money into the economy through consumer spending and some through the stock market. It is also believed that if inflation occurs that the value of the Yen would fall; making Japanese exports more sought after (since they are cheaper). [...]

US Debt Crisis

Posted on by Rhys Williams

The amount of debt the US is allowed to have is set by Congress (American Parliament) and so has to be decided by both the Republicans (Conservatives) and Democrats (Labour).

In 2011 the US was coming up to its debt ceiling (the maximum amount of money the government is allowed to borrow), if Congress weren’t to agree for the ceiling to be raised then the US may have to default on its obligations (interest payments to debtors as well as payments to civil servants and social services etc).
We can see from the graph (source BBC News) to the left that in recent times all Presidents have increased the debt ceiling and borrowed money from international markets (particularly Chinese markets). [...]

The Costs and Distributional Effects of Unemployment

Posted on by Rhys Williams

The classical view on unemployment says that there are only unemployed people who are not able and willing to work at the going wage rate. So if people would accept a lower wage they would find jobs. In this view all unemployment is a short-term problem and the best solution is laissez faire – leave the market to find equilibrium to resolve the issue of unemployment.

If people accept lower wages then the costs of living will fall as firms do not need to charge such high prices, so in fact workers will find the lower wages are acceptable once they start work. [...]

Case Study: Kraft’s Hostile Acquisition of Cadbury’s

Posted on by Rhys Williams

Cadburys, a British global producer of confectionary was bought out by the American Kraft in January 2010. Prior to the merger Cadburys was listed on the London Stock Exchange under the FTSE 100 Index. It was originally founded in 1824 in Bourneville. Its products include Flake, Dairy Milk and Milk Trays and the firm employed 45,000 people in 60 countries.

Kraft is the world’s second largest food company after Nestle, with revenues of £25.6 billion (2008) employing 98,000 people. They produce Dairylea, Milka, Philadelphia and Oreos.

The hostile takeover was first announced on 7th September when Irene Rosenfeld announced a 745p per share offer for Cadburys valuing it at £10.2 billion. [...]

A Brief Analysis of the European Debt Crisis

Posted on by Rhys Williams

The European debt crisis began in 2010 after many countries were beginning to come out of a deep recession caused by the Financial Collapse of 2007/08. Initially it was released that countries such as Greece and Ireland had huge debts. This was caused by previously low interest rates on their bonds, as well as a lack of tax reciepts due to the Financial Crisis and an attitude towards spending and maintaining a large budge deficit through issuing debt. In particular, Ireland (the government) was hit by huge costs in bailing out the banks which cost the government a lot of money which it had no way of regaining. [...]