a graph correlating inflation against unemployment rates. Using a horizontal axis to represent unemployment, and a vertical axis to represent inflation, A.W. Phillips found the rate of inflation and unemployment in Great Britain for every year between 1861 and 1957. When he had plotted the 97 dots on the chart, he had a rather neat hyperbola convex to the origin of the graph.
In other words, if the rate of unemployment was low, the rate of inflation was high, and vice versa. At the time, economists concluded that this was a logical outcome of both being influenced by the rate of interest: if interest rates were low, then unemployment would be low and prices would rise, but if interest rates were high then there would be lots of unemployment and workers would not have much money to spend... so prices would go down.
Unfortunately, when economists tried to design policy around this concept they disrupted the smooth relationship. In the years since the 1960's, there has not been a straightforward relationship, and Keynesian economics has had to be drastically revised to a post-Phillips Curve regime.
There is some correlation between inflation and unemployment, but the correlation is much more complicated than originally thought. It is quite possible to have high unemployment and high inflation (i.e., a high "misery index").
In other words, if the rate of unemployment was low, the rate of inflation was high, and vice versa. At the time, economists concluded that this was a logical outcome of both being influenced by the rate of interest: if interest rates were low, then unemployment would be low and prices would rise, but if interest rates were high then there would be lots of unemployment and workers would not have much money to spend... so prices would go down.
Unfortunately, when economists tried to design policy around this concept they disrupted the smooth relationship. In the years since the 1960's, there has not been a straightforward relationship, and Keynesian economics has had to be drastically revised to a post-Phillips Curve regime.
There is some correlation between inflation and unemployment, but the correlation is much more complicated than originally thought. It is quite possible to have high unemployment and high inflation (i.e., a high "misery index").
The Phillips Curve implies a trade-off between unemployment and inflation. Unfortunately, this trade-off may sometimes represent more of a Faustian bargain.
by Abu Yahya February 14, 2009
Get the Phillips Curve mug.(ECONOMICS) international bank created after World War 2 to coordinate currency stabilization. Main policy tool consists of lending money to central bank of countries facing a liquidity crisis.
In some cases, as when a member government is insolvent, the IMF will impose a structural adjustment program (SAP) requiring the government to jettison programs it has to serve the poor. For this reason, the IMF is often harshly criticized.
In some cases, as when a member government is insolvent, the IMF will impose a structural adjustment program (SAP) requiring the government to jettison programs it has to serve the poor. For this reason, the IMF is often harshly criticized.
It is often said that the International Monetary Fund makes economic crises worse by imposing the same austerity program everywhere, thereby further reducing a member state's ability to pay its sovereign debt.
(Another way of putting this is that the IMF's policies are pro-cyclical
(Another way of putting this is that the IMF's policies are pro-cyclical
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Get the International Monetary Fund mug.(FINANCE) real estate mortgage backed securities; usually used to refer to the derivatives created by Fannie Mae and Freddie Mac that were used to create collateralized debt obligations CDO's.
Most economists seem to agree that the 2008 crisis was caused by the collapse of the real estate market, which was mainly caused by the toxic relationship between RMBS's and the CDO's created mostly with them.
Most economists seem to agree that the 2008 crisis was caused by the collapse of the real estate market, which was mainly caused by the toxic relationship between RMBS's and the CDO's created mostly with them.
For almost eighty years the RMBS business helped people buy homes, with few serious problems. Then Congress abolished Glass-Steagall, the banks merged and created CDO's, and total disaster followed.
And now our neighborhoods look awful as well.
And now our neighborhoods look awful as well.
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Get the RMBS mug.(FINANCE) a tradable financial instrument that consists of a commitment to buy a fixed amount of X at a fixed price (known as a "strike price"). Put options are the opposite of a call option, in which ones to sell a fixed amount of X at strike.
Put options are useful to traders interested in covering risk. They guarantee a minimum price at which one can expect to sell one's holdings of X.
When the strike price of a put is less than the spot price, then it is "out of the money" and has no intrinsic value.
Put options are useful to traders interested in covering risk. They guarantee a minimum price at which one can expect to sell one's holdings of X.
When the strike price of a put is less than the spot price, then it is "out of the money" and has no intrinsic value.
Buying put options is a way of shorting a stock; but it can also be used as a hedge against unpleasant surprises.
by Abu Yahya April 15, 2010
Get the put option mug.All of the parts of a productive system that contribute to marketable products; the productive elements in a particular economy. This includes the entire network of firms, regulatory bodies (like government), infrastructure (roads, telecommunications), and financial intermediaries (banks, thrifts).
In a global economy, there are many industrial systems. In fact, it's quite possible that a single town could have companies belonging to different industrial systems; e.g., a paper mill near a biotech research facility. Almost none of the productive systems share potential employees or potential markets; a recession for the biotech business could--and probably would--completely spare the paper mill. Moreover, the managers of the two businesses probably want opposite policies: the mill owners want low taxes and small government, while the biotech researchers want big spending on education and infrastructure.
Much confusion is caused by calling the industrial system the "economy." The industrial system is not the economy. The industrial system is an organic entity within a greater economy. Various policies may be beneficial for this or that industrial system, with an ambiguous effect (if any) on the economy.
In a global economy, there are many industrial systems. In fact, it's quite possible that a single town could have companies belonging to different industrial systems; e.g., a paper mill near a biotech research facility. Almost none of the productive systems share potential employees or potential markets; a recession for the biotech business could--and probably would--completely spare the paper mill. Moreover, the managers of the two businesses probably want opposite policies: the mill owners want low taxes and small government, while the biotech researchers want big spending on education and infrastructure.
Much confusion is caused by calling the industrial system the "economy." The industrial system is not the economy. The industrial system is an organic entity within a greater economy. Various policies may be beneficial for this or that industrial system, with an ambiguous effect (if any) on the economy.
The family model was incorporated into the industrial system with the agent (who was the chief manager) filling the father's role. The same model was also expressed in the hierarchical management structure... The overseer was the "father" of his workroom and was expected to treat the workers like his children.
(Tamara K. Hareven, *Family Time and Industrial Time* 1982, p.4)
(Tamara K. Hareven, *Family Time and Industrial Time* 1982, p.4)
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The US Bureau of Labor Statistics regularly publishes six estimates of unemployment. The others are U-1, U-3, U-4, U-5, and U-6. Eurostat publishes one monthly estimate of unemployment for the European Union, which is approximately midway between U-3 and U-4.
The unemployment statistics for the USA are collected through a monthly Current Population Survey (CPS) (also known as the household survey) and an establishment survey.
The US Bureau of Labor Statistics regularly publishes six estimates of unemployment. The others are U-1, U-3, U-4, U-5, and U-6. Eurostat publishes one monthly estimate of unemployment for the European Union, which is approximately midway between U-3 and U-4.
The unemployment statistics for the USA are collected through a monthly Current Population Survey (CPS) (also known as the household survey) and an establishment survey.
As a measure of unemployment, U-2 focuses on workers who must abruptly deal with the loss of income after having lost their job or recently finished temporary employment. It is nearly always more than U-1, but there are occasional exceptions.
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Get the U-2 mug.(ECONOMICS) A bank that is empowered to issue currency. In the USA, between 1863 (National Bank Act) and 1935, any bank with a federally issued charter (i.e., a national bank) was allowed to issue currency. After 1914, few did.
The US Treasury issued a small number of banknotes until 1971.
In the UK, banknotes of the Bank of England are legal tender; but the Royal Bank of Scotland is also a bank of issue.
Today, in almost every country of the world, the sole bank of issue is the central bank of that country.
The US Treasury issued a small number of banknotes until 1971.
In the UK, banknotes of the Bank of England are legal tender; but the Royal Bank of Scotland is also a bank of issue.
Today, in almost every country of the world, the sole bank of issue is the central bank of that country.
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