Without huge tax rises, government departments will have to cut around £37bn from their budgets by 2013-14. Yet all three main parties refuse to explain how at least £30bn of these savings will be found.

To illustrate the scale of the challenge, the Financial Times has simulated the next three year spending review, highlighting the type of decisions the next chancellor will face if taxation stays on the same path.

You need to register to play (but it’s free).

It’s a good introduction to the tough decisions that the next chancellor will have to make.

You can play the game here.

“It’s not by chance that Chileans were living in houses of brick—and Haitians in houses of straw—when the wolf arrived to try to blow them down. In 1973, the year the proto-Chavista government of Salvador Allende was overthrown by Gen. Augusto Pinochet, Chile was an economic shambles. Inflation topped out at an annual rate of 1000%, foreign-currency reserves were totally depleted, and per capita GDP was roughly that of Peru and well below Argentina’s…

Milton Friedman has been dead for more than three years. But his spirit was surely hovering protectively over Chile in the early morning hours of Saturday. Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.”

Read the article here.

Economics is a fascinating subject, but it is always controversial.
Here the always controversial ‘Mises Institute’ present their take on the recycling debate and whilst we don’t have to agree with their solutions the arguments are important to understand!

Let us Know what you think!?

Image copyright of mises.org/

John Maynard Keynes was born in 1883 the same year that Karl Marx died, and whilst both wrote critiques of the capitalist system here the similarities end. Marx was an angry loner, his ventures and business failed and the majority of his life was spent in exile. Working anonymously and alone in  the British library, Marx spent many years sculpting his theories about the inevitable overthrow of the free market system. Perhaps the saddest thing is that Marx never lived to see his theories proved wrong.

Keynes was very different, a dashing figure and a brilliant economist, who could also mix with the elite of British society. Keynes attacked the inequalities and inefficiencies of the capitalist system it didn’t stop him from making a small fortune speculating on the foreign exchange markets.

Keynes was also a visionary, while the Allies were clamoring reparations to be imposed on Germany he saw that they would be would be impossible to repay claiming that it would reduce

His book on the subject “The economic consequences of the Peace” became a best seller. Keynes didn’t just restrict himself to economics, he wrote a book on mathematical philosophy, was a leading figure in the Bloomsbury group of leading artists, poets and writers. He even opened his own theater, which proved a great success.

Keynes was brilliant at many things and he knew it. Once he was placed second in an economics exam. His only reply was that:

“That shows I know more economics than the examiner.”

It was the effect of the great depression that led Keynes to his greatest work. He scoffed at the orthodox free market economists who said the government should do nothing in the face of mass unemployment. Keynes’s strategy was for the government to intervene by spending, if necessary by borrowing. This would create jobs, which would give income for others to spend thus creating more jobs. A simple idea but one too radical for western governments who were too unwilling to borrow. (Un)fortunately it wasn’t until the Second World War that  governments were forced to spend so that employment increased to pre 1929 levels.

Unlike the  radical ideas from economists such as Malthus, and  Marx .  Keynesianism wasn’t rejected by later theorists the vine but became part of the economic orthodoxy in turn creating a whole section of economics (Macro Economics).

The legacy of Keynes is remarkable; governments in the West followed Keynesian policy’s up to the 1970s. Generally these decades were seen as a time of great stability and prosperity. Full employment was maintained and many countries experienced record growth.

However economics is a fluid subject,  Keynesian economics fell out of favor with a recent resurgence of support for neo-classical ideologies with governments once again praising the ideals of the free market.

However following the rise and fall of (Neo)Orthodoxy Keynesian theory has seen a resurgence fortunately time and space prohibit a discussion of this latest development right now . The previous Bush administration showed remarkable fiscal irresponsibility. The current budget deficit is approaching $600 billion combined with a current account deficit of approximately $665 the US economy is anything but a paradigm of classical economics.

In our next Blog we will look at the rise of (Neo) Orthodoxy and we will look at Keynes’s doppelganger Milton Friedman.

Because of this economics has provided us with a wide variety of rich and interesting characters and over the next few weeks we hope to introduce you to some of them!

Banking and finance are a common destination for economics graduates. Banks value economist’s as they have quantitative skills as well as an analytical flair and a good business knowledge.

On good website to see what a life in investment banking is really like visit a great website we found called ‘mergers and inquisitions’ detailing every thing from investment banking ‘lingo’ to an average day and of course the pay- it’s a good starting point for those who want to know models about this highly demanding but very well paid career.

Another great site is the Deuchste bank website which have published this guide

Of course if you don’t fancy doing something like Banking there is a wide variety of subjects which can be studied

So given all the recent ‘mess’ in world economy what value does ‘modern’ economics have to offer us?  Well it depends on who you ask. Here Stephanie Flanders offers some news and views on whether economics is a ‘busted flush’.

For those of you who don’t/cant be bothered to read the whole thing her argument in a paragraph

‘So, all in all, not an edifying list of complaints. But does that mean economics is a busted flush? I’m afraid not, because even if you think economics got a lot of this stuff wrong, you’d be hard-pressed to understand – or to fix – what’s happening in the global economy today without it. ‘

Maybe it’s not such a good time to be an economist. But it’s one helluva time to study economics.

http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/07/is_economics_a_busted_flush.html