Bellerbys Economics - Mr Stephenson

Friday, April 28, 2006

Economics, economics everywhere......

This week's been a busy week in economics - every week's a busy week in economics - the study of everything!

I know some of you went to see Hilary Duff (isn't she great? Though not as good as Stephanie Sun or Group 666 I guess) at the Brighton Centre on Wednesday - but the material girl who really understands the economics behind rock music is Madonna - read how she does it here:

Oil prices are rising - the USA is the world's biggest importer of oil - what effects will this have on the US economy? That's right - inflation and lower growth as the aggregate supply curve shifts left. Ben Bernenke at the Federal Reserve has 'expressed worries'. The situation has been made worse by speculators in the US stockpiling oil reserves to force up the price further hoping to make a kill.

President Hu has been in Africa all week. This is the continuation of China's 'New Africa' policy which they have been pursuing for five years now. In terms of natural resources, Africa is very rich - newly discovered oil reserves in countries as diverse as Gabon, Guinea, Nigeria and Somalia - are very tempting to China. For historical reasons, these countries are not too friendly with the developed countries, so China has an opportunity here to act as big brother in the Chinese sense. In exchange for the oil and access to African markets, China is trading experience in infrastructure development, machinery and cheap consumer products. This strategy also fits nicely into the new BRIC and A7 strategies that have been developing over the last two years (BRIC - Brazil, Russia, India, China) and A7 (BRIC + S.Korea, Malaysia, S.Africa) which argues that developing countries should trade more with each other and not just act as a source of cheap products for the developed world.

This is what Pres HU said:

"Africa has rich resources and market potentials, whereas China has available effective practices and practical know-how it has gained in the course of modernisation. China's development will not pose a threat to anyone. On the contrary, it will bring more development opportunities to the world." Nigerian parliamentarians gave the Chinese president a standing ovation at the end of his speech.

Gazprom is rapidly becoming a major player in Europe. The Kremlin-controlled company (the Russian government has a 51% stake) managed by Economics genius Alexei Miller has its eyes on Centrica - the British gas supplier. The British government is worried. Centrica provides 25% of the UK's electricity (likely to rise to 40% in the next few weeks) through gas-fired power stations - and also 90% of the UK's domestic and industrial gas supply. Rumour has it that the government will prevent Gazprom from taking over by using the Competition Commission to argue that it would create a monopoly in the UK - but Pres Putin is annoyed because this is clearly an excuse - if the government was worried about monopoly, it would already have moved to break Centrica up.

Walkers Crisps (60% of the market) have responded to public pressure and reduced the fat and salt contents of their crisps to almost safe levels - a good example of property rights being exerted through pressure groups in the community.

China has increased interest rates from 5.58% to 5.85%. Inflation is not really a problem, but it is worried that economic growth of 10.2% a year is becoming uncontrollable. This seems more like a political decision - the central government showing who's in charge - rather than a strictly economic decision.

Module 3: Disposing of nuclear waste is the big problem isn't it? How do you dispose of something safely for 25,000 years? Find out how the Finns are planning on doing it here:

Richard Branson is one of the UK's ten richest people. I met him once at a reception and - being the sort of person I am - I mentioned a business idea I had to him. I expected him to walk away as quickly as possible. After all, people must be always doing this to him, but he didn't. He listened to what I said, replied that it could just work, and gave me an email address to contact in his organisation - which I did. The quality of his response impressed me. Although it's always difficult to tell what someone else is really like, I did get the impression that he was an honest, straightforward sort of person - you can find out what he is trying to do to help Africa here:


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