Latte Lesson (1)

As we near half term I like to take a break from the classroom and have a latte lesson - where the Economics department provides the Fair Trade tea and coffee and elevenses whilst students arrive at the coffee bar armed with their own selection of interesting articles gleaned from the media over the last seven days. There are only two rules! One that students must talk about their articles rather than read them out! And secondly that nobody goes near a copy of the Daily Mail.

I really enjoyed the first latte lesson of the day - here is a snapshot of the issues discussed together with some links to the source material:

Highest UK trade deficit since 1697

New figures show a steep rise in the monthly trade deficit with exports being hit by weakening demand in global export markets. Imports are also down (a sign of a domestic consumption-led recession here in the UK) - but the £8.2 billion trade gap last month is a simply huge figure. Even the recent depreciation of sterling seems to have done little to engineer a partial re-balancing of our trade figures.

Finding a sustainable business model in the music industry

The Economist reports on evolving business models in the music industry. CD sales continue to slide whilst music downloads increase - but overall revenues are falling and this is impacting on how much new music is being commissioned and recorded. We discussed some of the options for generating revenues - ranging from consumers paying individually what they wanted for each download (the approach pioneered by Radiohead) to advertising models and joint venture such as the new one between Nokia and Apple which allows for unlimited downloads as part of the lengthy contract for the new mobile phone.

Can emerging markets remain unscathed from the global financial turmoil?

The notion that emerging market countries can successfully decouple their economies from the headwinds of global financial distress is hard to justify. We discussed this article from the International Herald Tribune which looked at the impact of falling world commodity prices on countries that have enjoyed rapid growth of the back of investment in fast-growing export markets and in selling highly priced primary commodities to the developed world.

Faith and Trust in Banking

Anatole Kaletsky has written a piece in the Times which argues that the only feasible option is for sovereign governments to guarantee the deposits within all domestic banks. Banking depends fundamentally on trust - between bank and customer, between bank and fellow bank. And also between banks and the governments who depend on them.

Safe keeping - rising market demand for home safes

The demand for household safes has expanded dramatically as people look to take money out of banking systems and hoard cash - safe in the knowledge that the contents are insured under normal home and contents policies. We discussed the costs and benefits of such a decision. Costs include the purchase or leasing cost together with the opportunity cost of hoarding cash at a time of above-normal inflation.

Failure of the credit rating agencies

New Scientist magazine has a feature length analysis of the failings of the experts employed by the credit ratings agencies and in particular the persistent failure of their risk models. How did some of the brightest mathematicians on the planet get their risk analysis so badly wrong?