The International Monetary Fund (IMF) has sharply increased its growth forecast for the UK economy.
It now expects the economy to grow 2.4% this year - faster than any other major European economy - against its previous forecast of 1.9%. In 2015, it expects growth of 2.2%.
The IMF also raised its global growth outlook slightly to 3.7%.
"Global growth is expected to increase in 2014 after having been stuck in a low gear in 2013," the IMF said in its report.
Britain's recovery is real and is the best we've experienced for years
Read more at
http://www.bbc.co.uk/news/business-25823217

'Typical monopolies'  - great example for Unit 1 and Unit 3 Economics
Without competition they make huge supernormal profits  and give customers a low quality service.
Watch the video at http://www.huffingtonpost.co.uk/2014/01/21/christmas-power-cuts-tim-yeo_n_4636530.html?utm_hp_ref=uk

A senior Tory Tim Yeo has delivered a stinging attack on energy company bosses who left thousands of customers without power over the Christmas break, accusing them of behaviour "typical of a monopoly".
He said power distributors had displayed "utter complacency" and of failing to show any concern for  customers.
Bosses from the leading distributors - Scottish Power, UK Power Networks, Scottish and Southern Energy, Electricity North West, Western Power Distribution and the Energy Networks Association - gave evidence to the committee on the blackouts which hit households for days following storms during the Christmas period.

'You have lacked any expression of real concern for your customers. It's absolutely typical of a monopoly, particularly monopolies whose charges are not very visible to the customers who have to pay them," he said.

Quantitative easing is a challenging topic and one Economics teachers hardly had to teach until the crash came and the Bank of England couldn't lower interest rates any further. Here are some links that might help you understand it and be able to evaluate whether it has worked or not.

Quantitative easing explained http://www.bbc.co.uk/news/business-15198789

Households lost from Quantitative easing http://www.bbc.co.uk/news/business-24939396

For everyone studying business and economics this is the key question....................
What's going on in the British economy?
There is recovery but is it sustainable? A2 Economics take special notes as this is what we will be studying later  this week.
The mystery is why the recovery is happening now, as opposed to last year or next year or some other time. And why are households increasing consumption when their real incomes have fallen and set to fall further?
There is an issue about the sustainability and quality of this recovery when the only cause is Consumption - without British exports markets (e.g. Europe) recovering, and without UK business investing again it may not be sustainable.
Contrast this with the article below about China - their growth is Investment led not Consumption led.
Most people would say, of course, that any recovery will do, after recession and stagnation. But it matters that private sector companies follow the lead of consumers and start spending.
The recovery has been driven by households spending a good deal more than economists anticipated because this has happened at a time when a typical household income has fallen 6.4% since the 2008 crash.
Which begs the question why on earth we are spending more.
Economists and A2 business  - You know the answer from last weeks - it is because  we are saving less.
The ratio of people's saving to income,  is falling from 6.8% last year - which some would see as a healthy rate - to 5.7%.
 5.7% is still pretty high compared with the negligible saving we did in the boom years. But given households' still massive indebtedness - more than £1.5 trillion, equivalent to more than 140% of available income - many would argue that the rate of saving is on the cusp of being inadequate.
The picture of individual indebtedness is not pretty: the debt is unevenly distributed, and somewhere between 5m and 9m households would struggle to keep up the payments if interest rates were to rise to anywhere near levels regarded as normal in the UK.
So why are Households  saving less?
Could it be the WEALTH EFFECT with the revival in the housing market, which has seen prices surge in London and the South, and stabilise elsewhere - such that people feel a bit more confident about their individual net wealth?
Could the surge be because of the governments  Funding for Lending scheme, which has increased the flow of lending to buy houses, and made mortgages cheaper.
But the government has announced it is reducing this scheme so may be growth will not be so storng for the coming year.
OR Could it be the very loud noises made over the summer by the new governor of the Bank of England that interest rates aren't going to rise any time soon, his famous - or perhaps notorious - forward guidance?
Or could it just be that there haven't been any huge economic or financial calamities in the world since the near meltdown of the eurozone at the end of 2011, and we've just forgotten that many of the structural economic flaws here and abroad, especially in Europe, that are yet to be fixed.
Robert Peston says ‘For what it's worth, my hunch would be that the Bank of England's half promise not to increase the cost of money played a big role - on the totally unscientific basis that the question you ask me more than any other is what is going to happen to interest rates’.
Which would imply that any hint that interest rates are set to rise soonish could stop the recovery dead in its tracks.
Once again this illustrates the vital importance of Interest rates in the UK economy.

Labour proposes Banks market share cap

To increase competition and contestibility in the retail banking market Labour has an election proposal to cap the market share of the five big banking groups, Barclays, RBS, Santander, HSBC, and Lloyd's  and to force these five to sell some of their high street branches to new banks.

Bankers bonuses

A new EU law caps bonuses banks can pay to twice their salary.

George Osborne says this is more evidence of EU government failure. And you can write about it in essays as government failure resulting from information failure with unintended consequences.

Think about this ..... There is no limit on salary increases so if  a bonus cap is double, then a higher salary means a bigger bonus can paid. Eurocrats missed this one.

From the Chancellors view point a worst case scenario is that banks increase salaries as reward to bankers not bonuses. Bankers bonuses have a special higher tax applied to them. Higher than the income tax bankers will pay on increased salaries. So the government could suffer a loss of tax revenue!

Negative interest rate

Sounds crazy I know

Why would anyone pay interest to someone they are lending money to ?

But it's not as crazy as it sounds if the lenses has another reason to lend.

For example if someone in an economy where there is high inflation, low nominal interest rates and also risk of an economic crisis may want a safe haven such as a Swiss bank and is prepared to pay the Swiss bank to keep their money safe.

Moreover a negative one percent interest in a bank in a country where inflation is very low , say 1percent means the real interest rate is minus 2 percent while in a country with higher inflation , say 3 percent and an interest rate of 0.5 percent actually has a real interest rate of minus 2.5 percent - which is a worse deal for the saver.

The Bank of England base rate is the interest paid to commercial banks on the reserves held by the Bank of England so that commercial banks can settle their accounts with each other. This is an important service and a legal requirement that commercial banks may be prepared to pay interest for. 

Borrowers would want to borrow more if they were paid to borrow so firms would be likely to borrow to invest more and consumers would want to borrow to consume so this should increase Aggregate Demand.
However, negative interest charged to ordinary savers is an incentive to keep cash and not put your money into a bank  so the supply of funds that banks could lend to firms for investment will fall which will reduce Aggregate demand.....so a negative interest rate is not a straightforward solution to the slow recovery of economic growth (N.B. evaluation). 

MINTS now added to BRICS

In 2001 the world began talking about the Bric countries - Brazil, Russia, India and China - as potential powerhouses of the world economy. The term was coined by economist Jim O'Neill, who has now identified the "Mint" countries - Mexico, Indonesia, Nigeria and Turkey - as emerging economic giants. Here he explains why.
His radio 4 programme on Thursday 9th January 2014 at 9 am and again at 8.30 pm is about the MINTs - a must listen for A2 Business studies
Listen to the first episode of MINT: The Next Economic Giants on BBC Radio 4 on Monday 6 January from 09:00 GMT, or afterwards on iPlayer.

Cliff notes can be useful for extending economics understanding -  http://www.cliffsnotes.com/more-subjects/economics/introduction/economic-policy

The Bank of England has some great new videos explain what they do.
Click on the Link on the right.