House prices have much further to fall

Two years ago almost everyone I spoke to said house prices in London never fall. They then fell by about 15% in short order, more in many places. Now that recent data suggests that prices have recently risen, people are once again suggesting that the market has stabilised and may even be about to take off again. This is very unlikely. Indeed its highly likely that house prices will soon resume their slide, which will continue for many months, probably years.

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What will the next government do about public spending?

Whoever wins the next election is going to face a huge fiscal deficit (around 11% of GDP) and a mounting national debt. Therefore its more or less inevitable that at some point they will have to either cut spending or increase taxes substantially. With the economy likely to be weak for many years, and assuming the Conservatives are the next government, large tax increases seem unlikely. So there will probably have to be major cuts in public expenditure if the books are ever going to balance. Where might these be made? And could this lead to some major changes in our public services?

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The problem with maths, as currently taught

I spend quite a bit of my time teaching maths at GCSE and A-Level and so sometimes get asked whether standards are ‘falling’ (as is usually supposed) or why exactly we (as a nation) are so bad at the subject. In fact the main problem, as it seems to me, is not the standard of maths taught or the level we are reaching relative to other countries, but the way in which the subject is taught that is the real problem. At the moment maths is taught as a set of mechanical techniques which are supposed to be applied to problems in a particular format without any sense of the underlying logic or connections between different topics. And that is causing all kinds of problems.

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Debt repayment marks the beginning of a new era

Spending’s out

Once upon a time Britons – along with Americans – liked nothing better than to max out their credit cards, take some equity out of the house, and go on a spending spree. Savings were for losers, when your house was going up in value by 15% per annum. This apparently benign behaviour kept the world economy afloat for the best part of 25 years. But news today that consumers paid off more debt than they took on for the first time since 1993 shows that consumers have finally started the long and painful process of paying off the massive debt they have accumulated. The result is likely to be a long and prolonged period of low growth and inflation – much like Japan in the 1990s.

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Bad arguments against national debt (2) – “crowding out”

Alastair Darling – not worried about crowding out

Another argument you frequently hear about the national debt is that it ‘crowds out private investment and consumption". The idea here is that if the government borrows more, perhaps in an effort to stimulate growth, this has the effect of increasing the cost of borrowing for both consumers and businesses. This is because government is effectively competing with consumers and businesses for debt, so the cost of debt must rise. Consumers and businesses then consume and invest less, which may outweigh the effect of increased government borrowing on growth. This is a bad argument because it assumes that the supply of credit is unresponsive to demand.

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Why philosophy is worth studying

Friedrich Nietzsche, a 19th century philosopher

I spent quite a bit of my youth (yes, its now in the past!) studying philosophy. I read PPE at Oxford and then did an MPhil in philosophy at UCL. But I largely left it behind after getting thoroughly fed up with modern Western (so-called analytic) philosophy’s narrowness, obsession with formal logic, and scientific pretensions. Having said that I still think its worth studying because its pretty inescapable as well as being surprisingly very useful.

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Bad arguments against national debt (1) – “we might default”

The political debate in the run-up to the next election seems set to be dominated by the issue of the mounting national debt, and what if anything we should be doing about it. This has generated a whole host of arguments for and against the use of national debt, most recently David Cameron’s suggestion that the UK runs the risk of defaulting on its debt. This is just one of a slew of bad arguments that have been made on this subject recently.
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How come there’s inflation here, but deflation nearly everywhere else?

News today that inflation in the UK was flat in July (i.e. there was no change in the price level relative to June), and overall the level of inflation on the CPI is still positive at 1.8% year on year. This is now below the Bank of England’s target of 2% but nearly all other major economies are currently experiencing deflation, i.e. a falling price level, as explained here. So what’s different in the UK? The answer in brief is because we import so many goods, and the pound has been so weak.
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