GMO WHITE PAPER March 2012 What Goes Up Must Come Down! James Montier A Little Detour into My Murky Past Nearly a quarter of a century ago‚ I was a young‚ naïve‚ and foolish believer in an economic concept known as rational expectations – an elegant‚ mathematically beautiful theory with no practical use. In Star Wars parlance‚ I had effectively been seduced by the dark side. Thankfully‚ several of my university lecturers were determined to save me from this terrible fate. They insisted on teaching
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gradual RMB revaluation‚ accompanied by measures to stimulate demand‚ will be China itself. Its growth is likely to be more balanced and resilient‚ and that will have a positive spillover on the rest of the world‚ including by reducing currency and trade tensions. RMB revaluation causes a loss to consumers outside China since they will confront higher prices of goods imported from China. These losses have to be offset against those of producers who will gain competitiveness. Moreover‚ China’s trading
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Chapter 2: National Income Accounting Difficulty: Easy 1. In calculating this year’s GDP‚ national income accountants A) include any increase in stock values B) include an estimate for income from illegal activities C) exclude Social Security payments to retirees D) exclude the value of any repairs made on existing property E) exclude the value of new pollution control equipment that is being installed Ans: C Difficulty: Medium 2. Assume you built a new house‚ bought a used
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Germany is lower than that of the UK’s‚ with it being 6.5% and theirs being 7.8%. The inflation rates of the two countries are quite similar; in 2012 Germany had an inflation rate of 2.2% while the UK had an inflation rate of 2.8%. The current account balance of Germany was number 1 in 2012 with $208.1 billion but the UK’s was -$57.7 billion. This is due to the fact that Germany’s exports were valued at $1.492 trillion and their imports were valued at $1.276 trillion‚ this means that they made more money
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Pakistan has never had a consistent‚ coherent and well-articulated export-led growth strategy. Indeed‚ exports are often treated as a residual‚ an after-thought‚ once the domestic market has been filled. This is inexplicable given our persistently large trade deficit which has not been reduced over time and we have difficulty financing it (filling the gap) each year. Economic growth has at various times been driven by either the public or private sector or more recently - and most disastrously in the previous
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While reading my Unites States History textbook‚ I ran upon the word "Mercantilism". But what does mercantilism really mean? An example of mercantilism would be like this: A colony produces tobacco. The tobacco is then shipped back to the mother country and made into cigarettes. The mother country then SELLS the cigarettes back to the colony. Many countries in Europe‚ especially England and Spain‚ used this method to obtain gold and silver. But does mercantilism benefit the colony as much as it benefits
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Multinational companies (MNCs) are believed to play a major role in the economies of developing countries. Ideally MNCs have contributed substantially towards the growth of developing countries. MNC is most simply defined as a corporation or enterprise that conducts and controls productive activities in more than one country with the head office being established in a developed country. Big companies mostly from America‚ Europe and Japan but also increasingly from newly industrializing countries
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factors such as quality and after sales service. However‚ a fall in competitiveness will have some serious impacts on the UK economy. The first impact that a fall in competitiveness will have is the effect it will have on the current account of our balance of payments. If the UK’s competitiveness falls then the demand for our exports will decrease and domestic consumers are more likely to import foreign goods. This has a negative effect on the current account and if this is the case in the long run
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export receipts fall. At the same time‚ the price of import goods and services will become expensive. This will lead to lower price of imports and resulting in higher demand of imports. Thus import payments increase. As a result‚ this will worsen the balance of payment and contribute to the current account deficit. This is the case when price elasticity of demand of the goods and services is elastic. This is because a small increase in price will lead to a larger fall in quantity demanded and larger fall
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Running head: DOLLAR DEPRECIATION The impact of a dollar depreciation on the trade balance of the United States Mai Dam Randolph College 2013 Abstract The trade deficit is an issue of concern in the contemporary U.S. economy. While depreciation of the dollar is used as a means to improve the trade deficit‚ the delay in its taking effect creates a puzzle for economists. The theory of J-curve is used to explain this delay‚ stating that a period of time is needed for the deficit to get
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