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The Huge Failure of The Mini Budget

 Elizabeth Truss, the new PM and Kwasi Kwarteng, the new chancellor released a “mini budget” last Friday, and there’s a lot to talk about. ·          What was in the mini budget ·          What were/will be its effects ·          My opinions on the mini budget The mini budget has had a drastic, negative impact on the economy within a week of its release and within a month of the Truss government coming to power. So, what is it all about. Key points The mini budget has come with drastic tax cuts, the largest in the UK since 1972. In terms of income tax [1] . The basic tax rate (for earnings between £12,571 to £50,270) will be cut by 1%, from 20% to 19% in April 2023 and the top bracket for earnings over £150,000, 45% will be removed, and the highest rate of tax will be 40% for earnings over £50,270. The removal of which has been cancelled. Additionally, Stamp duty [2] has been cut, there is no stamp duty for properties purchased for under £250,000 and for first time buyer
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Why is there high inflation?

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In this blog, I will be covering: ·          Why prices are rising ·          What should the government/ central bank do? Inflation is the general increase of prices in an economy, typically shown by a rise in the consumer price index (CPI). CPI is the measure of the change in the price of consumer goods weighted by goods and services purchased by households, CPIH is CPI plus housing costs. In the past 12 months up to June 2022, CPIH has increased by 8.2%. This means that consumer goods in June 2022 are 8.2% more expensive than they were last year, effectively reducing the real value of money. Inflation can be caused by many things: a reduction in short-run aggregate supply (SRAS) [1] and/or an increase in aggregate demand (AD), an increase in the money supply (according to Fischer’s equation MV=PT or MV=PQ) or a change in foreign exchange rates (depending on whether the country is a net exporter or importer). Why has inflation (in the UK) been so high? The root cause is th
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Why Bitcoin is glorified gambling

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 Firstly, I have finished my exams now and will be returning to my normal schedule. And secondly, tomorrow marks my blog’s 1 st birthday, it has been a brilliant year for sharing my take on economics with all of you and I am glad to say that it has been an enlightening journey writing this blog and I hope that it has provided a certain degree of educational value to all of you. Without further ado, let’s get onto today’s controversial topic, bitcoin. I will be discussing what bitcoin is, whether it should be considered a currency, how it has accumulated its value, and why it is volatile. Bitcoin is considered the “poster boy” for cryptocurrencies, this is on account of its large trading volume, price (at the time of writing this blog, (29/06) the price is £16,543) and fame. Bitcoin is considered by some, “the future of money”, this is because the “currency” itself is encrypted (hence “crypto”-currency) and completely online allowing for a reduction of frictional costs (the costs t
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What economic policies should governments around the world use to economically empower women and girls?

Quick introduction before I get into it. So this was my essay for an essay competition with the title written above and I was quite happy with the methods I mentioned below so I am choosing to share this with my readers. The FCDO has not yet announced the winner, therefore this is a disclaimer that I was and still am the author of this essay, I wrote this in late January and early February and am posting it on the 20th of May because I need to revise for my exams.  Speaking of exams, I will not be posting any more content on this page until they are finished in roughly 4 weeks It is crucial to economically empower women and girls in all of their struggles in the world, especially in emerging and developing nations. This is because of the multitude of challenges that they face on a daily basis, with their potential being severed by being forced to remain a housewife without sufficient funding to begin a venture or pursue higher education to unlock their boundless potential only 47% of w
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The Lorenz Curve

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PS- Sorry about the digital quality of today's blog. I typically use "Microsoft Word" to write the blog itself and then transfer that onto "Blogger" but this week I used the "Equations" setting to do all the maths for today and I realised that I couldn't copy that onto here very well, hence the quality.
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How does banking actually work? Part 3: Dealers

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 Dealers provide liquidity in most financial markets. The dealers are those who connect sellers and buyers. This is through buying equity, bonds and even currency from those who want to sell them and selling them to those who want to buy them. They are some of the most important financial intermediaries in the world. How do dealers provide liquidity? A liquid market is "one in which an individual transaction does not disrupt the continuity of the market" Meaning that you can buy and sell quickly without having drastic changes in the price. This can be shown in terms of price very clearly. Dealers are vital in upholding the financial market’s liquidity. Dealers make it easier for someone to sell much more of the derivative without crashing the market. This is important as in the present-day banks and many other financial institutions confront their liquidity risk though being able to sell their assets, typically at a moment’s notice. Acting as the middleman, the dealers
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How Does Banking Actually Work? Part 2

 In this blog I will be discussing: ·           How banks transfer money ·           How banks make a profit ·           How the banks adhere to liquidity and solvency constrains So, the hierarchy of money is important because of its implication. Gold can buy you currency and vice versa, currency can buy you credit (sometimes securities, but the value of securities makes it impractical to use currency), credit buys securities. Therefore, corporate banks want to hold as much credit as they can. What do I mean by credit, in terms of banks? Credit in banking refers to the deposits of banks in other banks. (This is a complicated process, but I will try to simplify it with a scenario) Let’s assume that I deposit money in Bank A, and you have your money in Bank B. I want to transfer you £10,000, so I go on the banking app, and transfer you the money. This is processed in the banking world by your bank, Bank B, receiving an additional £10,000 worth of credit from Bank A. Hence, on a balance s
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Hierarchy of Money and Banks, How Does Banking Actually Work? (Part 1)

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I have written a blog on a similar topic to this, my “History of Banking” blog, in all fairness, I will admit that the blog was somewhat dull. But since then, I have begun a course on “The Economics of Money and Banking” and have found a new appreciation for the intricacies that are in the world of financial intermediaries. And believed it wise to share the knowledge that I have gained from the course with the readers of my blog. Hierarchy of money I will begin with the hierarchy of money. What does this mean? In short, not all stores of value are the same. For example, you cannot use an M&S gift card to buy a Microsoft Xbox. The hierarchy goes as such: gold, currency, deposits (i.e., in a bank), securities [1] . As shown below [2] .  This doesn’t apply perfectly in today’s world since international trade occurs in USD and not in gold, since it is the world reserve currency. Yet, before the USD was the world reserve currency, international trade occurred in gold. And the reserve
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