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Where to put your savings in today’s low interest rate economy...

I’ve been waiting to finish this article until the UK’s inflation figures were released. They show the CPI figure for November to be 4.1%, higher than predicted by the majority of economists. This figure is more than double the 2% target that the Bank of England’s Monetary Policy Committee is supposed to aim for, yet the UK’s interest rates are falling rather than rising. (Incidentally, a fall in the rate of inflation doesn’t necessarily mean that prices are falling. That is one possible interpretation, but alternatively it could mean that prices are continuing to rise, just not as quickly as before. Newspaper articles rarely make this distinction, unfortunately.) Of course, the MPC would say that it is targeting...

posted on: Dec 17, 2008 | author: Alex

Deflation or inflation – what will happen in the UK?...

I’ve written in a previous article about the various concepts involved in economic inflation and how it can affect the value of your money, your wages and the things you buy. The opposite of inflation is deflation, which I’ll explain in this article before going on to discuss the probable and possible situations in the UK for the next few years. The ‘deflation versus inflation’ argument is more important in the UK today than it has been at any time in the last 30 years, so it’s worth thinking about in some depth. So, deflation. If inflation is a general increase in prices and/or wages driven by the greater availability of money (whether ‘real’ money or debt), then...

posted on: Dec 6, 2008 | author: Lance

The physics of economics

Put two economists in a room together and you’ll get three different opinions on the state and future direction of the economy. Surely economics, the dismal ’science’, could learn something from one of the true sciences, such as physics? Certainly there have been efforts to do so, particularly among large investment banks and hedge funds, who have used quantitative analysis tools running on powerful computer systems to try to tease out the signals from the noise of price movements, taking into account thousands of different influences from interest rates to tax variations, asset prices to currency exchange rates and much more, all on the basis that there is some underlying predictability, some ‘law’ that governs price movement. Which...

posted on: Mar 11, 2008 | author: Alex