Monetary Policy UK Themes - HOT TOPIC for Paper 2! Must Watch 🔥
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- Опубліковано 18 тра 2024
- Monetary Policy UK Themes - HOT TOPIC for Paper 2! Video covering the big themes with monetary policy in the UK in 2024 focussing on the contractionary side
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dal mate ive told my parents about us
mans just summarising that the UK has cooked itself and we have to write about it 😭😭
Rubbing salt into the wound. Ong I still find it funny that tomorrow we may have to write about how incompetent those in charge have been over the past few years lmao 🔥🔥
@@klak5458 to be fair we have many examples we can use from the inspiring twats that have run this country LOL
@@klak5458 for paper 1 i talked about how fatties are ruining the economy lol
DAL GOT US LOCKED IN ON A SUNDAY MORNING 🔥🔥
DAL GOT ME LOCKED IN ON THE MORNING OF THE EXAM 💪💪
notes I made while watching the video for those in a rush, if I missed out on anything it's cause I gave up
Contractionary policy in UK at the moment, why?
- COVID caused economic crisis during its time, led UK to its worst recession in over 300 years. Bank of England and Monetary Policy Committee reacted by using expansionary monetary policy (cutting interest rates down to 0.1%, then forced to use 495 pounds worth of quantitative easing money to promote recovery)
- These intended to improve growth, reduce unemployment, prevent deflation and promot economic recovery
However:
- Banks were not willing to lend in the beginning of the Covid crisis, as they were concerned if jobs, businesses and industries would survive crisis.
- Also, very high inflation in the aftermaths of the Covid lockdown due to earlier policies. UK has been above inflation target for 3 years since (peak 11.1% in Oct 2022)
Contractionary Policy
- Interest rates have risen from 0.1% from Covid times to now 5.25%
- Also been using Quantitative tightening
Has it worked?
- Inflation has come down to 3.2% at the moment, but has taken a long time to do so and we are still above target. This shows the timelagged issue when using monetary policy.
- But inflation has also been driven by supply side causes involving the war in Ukraine, which has increased oil, electricity and food prices.
Intentions of Contractionary Monetary Policy (Pros)
- Reduce inflation
- Reduce household debt (since interest rates have gone up and amounts of household debts has gone down)
- Promote savings as returns of savings have risen
- High interest rates can promote more sustainable, organic lending and borrowing (only borrowing when necessary, therefore moving economy away from debt-fuelled consumption)
- Normal levels of interest rates will also provide more rate cut potential for the next time that the Bank wants to use expansionary monetary policy (this was an issue during covid as they could only cut from 0.75% to 0.1%)
Evaluation (Cons)
- Reduced economic growth and increased unemployment due to demand-side shocks
- Makes it difficult to pay back any current debt:
- [ Reduced living standards for individuals, drop in disposable income
- bankruptcy in worst case scenario if they cannot afford to pay back - households: assets taken away, homeless. businesses: shut down, more unemployment. ]
- Discourage investment (which is already low right now), hurting short term and long term growth
- Bank failure as many debtors were unable to repay at such high interest rates, creating insolvency issues. People were also moving their savings out of banks chasing higher yielding assets instead, creating liquidity crisis. (potentially create a ripple effect and bring down other banks, but didn’t happen thanks to strong financial market regulations)
Cut rates or not?
- Current debate to cut rates due to cons of high interest rates
- However, it is still too premature at the moment to cut rates as inflation is still high. Cutting rates at this time could refuel inflation which would take away the benefits of higher growth and employment anyways.
THANK YOU MAY YOU GET FULL MARKS IN ALL YOUR EXAMS
Thankssss
i love you
damn only £495 of quantitative easing. You sure they couldnt spare anymore??
NOT 495. 495BILLION @@catismarangeyes7769
Good luck for Monday guys we will smash it
bro got me productive on a sunday morning
dal we’ve really been through a lot together i think we should take our relationship to the next level
dal got us oiled up on a sunday morning
like dana?
NAHHHH BRO BLESSED US WITH THESE VIDEOS
Just had edexcel P2. Beautiful 15 and 25 marker - cheeky bit of ML condition
Yeh same what 25 marker did u do
LOCKED AND LOADED FOR THIS A* THANKS TO YOU DAL 🤩
😂
Watching this minutes before the exam, I'm soo cooked
Thanks daddydal
Love you Dal
will there be another paper 2 livestream?
can you make the eval point that QE can also lead to inflation?
Would we also discuss exchange rates for monetary policy?
not in the uk as exchange rate controls were abolished under Thatcher during the 1970s, so just ignore it, they most likely wont include a question about XR with monetary policy
@@SparkMediaProductionhe’s talking about hot money inflows
@@_trm_4339 I don't think we would bc the £ has depreciated.
@@marycudjoe-acheampong1776 outflows, inflows, depending on the question
Its final day and I’ll be watching econplusdal instead
Dal live today ?
The goat
Was the inflation caused by qe was demand pull inflation due to increased ad?
yes i think from government spending, in 2020 like Furlough and increase universal credit, which fed through to high inflation after the time gap
Live stream when ?
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It might be beneficial to consult with a financial advisor who can provide personalized guidance on your specific situation
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10:00 - How does higher interest rates lead to capital flight? Maybe investors chasing higher yielding assets such as short term government bonds or corporate bonds???
let me know
When interest rates are high, it becomes harder to borrow money due to the higher interest payments. So, companies may move their money (assets) elsewhere where interest rates are lower. Not necessarily just bonds
Surely with an increase in interest rate, household debt would increase, not fall.
No increase intrested rates encourage savings so people can pay off debts which would decrease it
@@haniidlibi4011 ok, thanks
my thoughts were that with higher interest rates less people would be willing to take out debt, so overall household debt would fall- although it would still be negative towards those already indebted
increase IR discourages ppl from taking on the debt, by letting enterprises who need to borrow borrow, reducing the risk of failing to recoupe loans as high IR prevents bad debtors with bad credit rating to borrow, unlike when IR was low like 0.1%
Hello :)
Dal where do I begin.....
all hail king dal
my demand for you is price inelastic dal
You quantitative edge me dal
interest rates are no longer flacid is what im hearing
what a glow up, sexy beast
6:52 - How does increasing interest rates reduce household debt?
From my understanding, households with variable rate mortgages find themselves paying more on their interest.
I guess the idea is that households that are in debt from other assets can be paid off more easily if they are receiving a higher ROR on their savings.
As a result of interest rates increasing , it becomes more expensive for individuals to take out loans therefore the average household will have reduced level of debt
@@michaelmoule7157 But also what Michael is saying is correct
@@salmanuddin9018 but this will make it more difficult to pay off current debts right?
W dal
How likely do you think financial markets are going to come up as I’ve not done a lot on them shall I just leave it..?
It was on his paper 2 hot topics
i got the same issue
I seriously predict it being section B on the exam because of what happened to banks in '23 but could be too obvious, financial sector hasn't really been examined that much in previous years
@@SparkMediaProduction thanks think i’ll just have a quick look over it
worst recession in over 300 years?
Thats what he said so itake his word for it
W dal