"Kal Draws Trade" is one of a series of six videos explaining economic concepts by Kevin "KAL" Kallaugher, the resident cartoonist for The Economist. Other videos in the series include "Taxation", "Hyperinflation", and "Dumping".
TRANSCRIPT From the time we are children, we swap things with others. We give and take for mutual benefit. This same principle of exchange and enrichment is what motivates trade between countries. Trade is widely regarded as a spur for economic growth. It encourages countries to specialize in certain areas of strength. This enables the world to produce more goods, and more kinds of goods than it otherwise could. Since World War II international trade has increased seventeen fold, helping to ignite economic growth around the globe. Despite the obvious benefits of free trade, there are many who are motivated to limit it. Tariffs, trade bans, and quota restrictions can be used as weapons to punish competing and opposing nations. This could lead to retaliation and a devastating trade war. Some critics argue that not all trade is good trade. Trading with poor developing countries, where wages are usually lower and working hours longer than in developed countries, can create an imbalance. The result can be a loss of jobs in high-wage economies. Despite these concerns free and open trade should be embraced. Embracing the alternative is child's play.
COMMENT These videos would be useful for teachers of Business Studies or Economics classes. I found the sound effects a bit over-intrusive though ...
TRANSCRIPT An economy is a tricky thing to control, and governments are always trying to figure out how to do it.
Back in 1776 economist Adam Smith shocked everyone by saying that what governments should actually do is just leave people alone to buy and sell freely among themselves.
He suggested that if they just leave self-interested traders to compete with one another, markets are guided to positive outcomes 'as if by an invisible hand'.
If someone charges less than you - customers will buy from them instead – so you have to lower the price or offer something better.
Wherever enough people demand something, they will be supplied by the market – like spoilt children – only in this case, everyoneʼs happy.
Later free-marketeers like Austrian economist Friedrich Hayek, argued that this ʻhands offʼ approach actually works better than any kind of central plan.But the problem is, economies can take a long time to reach their ʻequilibriumʼ, and may even stall along the way. And in the meantime people can get a little frustrated, which is why governments usually end up taking things into their own more visible hands instead.
Britain's economy dodged a return to recession in the first quarter of the year, providing some relief for Finance Minister George Osborne, who's come under pressure from the IMF to slow the pace of austerity. Joanna Partridge asks if the UK is doing enough to rebalance its economy.
TRANSCRIPT REPORTER: A spring bounce, as the British economy blooms back to life. The UK grew by 0.3% in the first quarter of the year, avoiding a triple dip recession. The GDP figures were better than expected, says Joe Grice from the Office for National Statistics. JOE GRICE: "It does look as if we have been on a plateau, a plateau with a gentle upward trend, and quite a bumpy one. So there is some growth since the trough of the recession, but it's been quite shallow and quite bumpy from one quarter to the next." REPORTER: The figures will come as a relief to British Finance Minister George Osborne, who was meeting with UK entrepreneurs. He's renewed his commitment to getting rid of Britain's budget deficit in 5 years. Osborne's debt-reduction plans were previously supported by the IMF, but it recently said the UK might need to slow the pace of austerity. In addition, ratings agency Fitch recently stripped the UK of its triple A credit rating. The GDP figures may help Osborne to convince the IMF Britain's recovery is on track. GEORGE OSBORNE: "Our economy is growing, jobs are being created, this is the right long-term course for the United Kingdom and we will not shift from the entrepreneurial path we have chosen." REPORTER: East London's the centre of the UK tech scene and is home to many new start-ups. Analysts say the fact that many traditional sectors like construction are still shrinking shows there's still work to be done to rebalance the British economy. Joanna Shields is CEO of the UK's Tech City Investment Organisation. Along with Osborne, she unveiled the Future Fifty programme - designed to help 50 UK firms grow faster. She believes the UK should focus more on entrepreneurship, to boost the technology sector. JOANNA SHIELDS: "We need to make entrepreneurship cool, we need to make it a credible career path. We need to teach more entrepreneurship in schools, we need to fill that skills gap with the right information and then of course the right role models." REPORTER: Britain's GDP data is only a preliminary estimate and could still be revised. But it may make it less likely that the Bank of England will expand its quantitative easing programme in May. The UK government will now hope the ride to recovery continues more smoothly, before the next election in May 2015.
VOCABULARY A triple-dip recession is defined as the third time there are two consecutive quarters of negative growth, the textbook definition of a recession.
THE CARTOON George Osborne, the UK's Chancellor of the Exchequer, is portrayed as the Chelsea player who got bitten. Only it's not Suárez who has taken bites out of his arm, but the credit ratings agencies such as Moody's and Fitch. Osborne's shirt has the word 'ECONOMY' on it, so the biting incident is being used as a metaphor for the damage done to the UK's (i.e. Osborne's) economic strategy by successive credit agency downgrades.
The title of the cartoon is a play on words. Biting criticism or wit is very harsh or unkind. • He made some biting remarks about the whole occasion.
VOCABULARY Bite is an irregular verb: bite, bit, bitten. • He was bitten by a dog, so he bit the dog.
An Easter bunny is hiding eggs beneath a bush. Meanwhile, a Cypriot man is digging a hole in the ground with a spade in which to hide his nest egg (a jar full of euros).
VOCABULARY A nest egg is a sum of money that you are saving for a particular purpose. • They have a little nest egg tucked away somewhere for a rainy day. According to The Phrase Finder, the allusion is to putting a real or china egg into a hen's nest to encourage her to lay. The connection between this and the 'savings' meaning isn't exactly clear. It may be that the idea was that the egg that was put into the nest could be later retrieved, after the hen had laid.
Two citizens of Pompeii are shown leaving a bank with bags full of euros. One tells the other, "Don't worry Hubris Maximus, this will soon blow over." Meanwhile, the volcano is erupting in the distance, showering the city with red hot ash.
BACKGROUND Now that the Cyprus banking crisis has been resolved (for the time being, at least), the spotlight has focused on Italy. In a bond auction Wednesday, Italy had to pay the highest yield on five-year bonds since October. Meanwhile, the ratings firms are circling, with Moody’s Investors Service offering a reminder in an interview with Reuters Wednesday that it’s looking at the Italian political deadlock carefully in relation to the country’s ratings. [Source: Wall Street Journal]
COMMENTARY If something such as trouble or an argument blows over, it ends without any serious consequences. The cartoonist uses the phrasal verb with an ironic double meaning, since the ash cloud will literally blow over the city. The citizen's name is significant too, as hubris is the sin of excessive pride (which, as we know, comes before a fall). The two men could be seen as representing the EU politicians who always wait until the last minute before taking action to stave off disaster. The problem is that sooner or later, they will leave it too late (just like the unfortunate inhabitants of Pompeii).
This cartoon by Dave Brown from The Independent relates to the Cyprus bank bailout under which Cyprus's second largest bank - Laiki Bank - will be closed down and deposits above 100,000 euros moved into a "bad bank".
The cartoon portrays German Chancellor Angela Merkel as a masked safe-cracker stealing euros from The Bank of Cyprus and putting them into a ballot box marked "Vote Merkel".
EXPLANATION There will be a federal election in Germany in September, and German public opinion is against further EU bailouts (which are mostly financed by Germany). To avoid damaging her chances in the election, Angela Merkel insisted on exceptionally harsh terms for the Cyprus bailout package. The cartoon shows the euros "contributed" by the Cypriot banks being transformed into votes.
VOCABULARY 1. A safe is a strong metal cupboard with special locks, in which you keep money, jewellery, or other valuable things. • The files are now in a safe to which only he has the key. 2. A ballot box is the box into which ballot papers are put after people have voted.
March 2012 was the third warmest on record in the UK, whereas March 2013 is expected to be the coldest since 1969. Many parts of the UK are still covered in snow following heavy snowfall last week.
The cartoon shows a Cypriot village this time last year, and the same village today. A year ago, everything was sunny. Cyprus's banks were still an attractive proposition for investors, offering high interest rates on deposits. A year on, however, and everything has changed. The snow symbolizes the disaster which has befallen Cyprus's banking system (the cold wind of economic uncertainty, the big freeze of fiscal disaster, etc.). In fact, the EU bailout deal agreed in Brussels last night closes down the island's second-biggest bank and inflicts huge losses on wealthy savers.
You can read Adams' own comments (and those of Telegraph readers) on this cartoon on his blog.
The Guardian reports that European leaders reached an agreement with Cyprus early on Monday morning that closes down the island's second-biggest bank and inflicts huge losses on wealthy savers. Full story >>
VOCABULARY A levy is a sum of money that you have to pay, for example as a tax to the government. • The benefit to motorists of falling crude oil prices over the past few weeks will be more or less neutralised by an increase in levies next month.
Cyprus adopts legislation allowing the government to split the island's failing lenders into good and bad banks as it races to clinch a bailout from the European Union and avert a financial meltdown. Sarah Charlton reports.
TRANSCRIPT Protesters gather outside parliament in Cyprus, as the government races to avoid financial meltdown. Social unrest is growing as officials struggle to approve a deal for a 10 billion euro ($13.00 billion) bailout from the European Union. On Friday (March 22), parliament adopted legislation to allow failing lenders to be split into good and bad banks. Lawmakers also voted to nationalise pension funds and pool state assets for a bond issue. Officials say a deal is imminent to raise enough money for the E.U. bailout, which could include some kind of levy on bank deposits. The government has until Monday (March 25) to raise 5.8 billion euros and prevent bankruptcy.
This cartoon by Michael Ramirez, the two-time Pulitzer Prize-winning cartoonist for Investors Business Daily, relates to the Cypus banking crisis and plans to impose a levy on deposits in Cypriot banks as part of an EU bailout. In a reversal of the usual bank robbery situation, the cashier is holding up a customer, who has his hands in the air.
COMMENTARY The original plan to impose a levy on all depositors provoked widespread outrage, and the Cypriot parliament rejected the EU-backed proposal on Tuesday, calling it "legalised bank robbery". A new plan has been put forward by leading Cypriot bankers which would impose a levy on higher deposits, but exempt smaller depositors. MPs are due to vote today on new proposals, the result of which will decide Cyprus's fate (follow live coverage from The Guardian).
VOCABULARY In American English, a bank cashier is called a teller.
BACKGROUND As part of a 10-billion euro EUbailout plan agreed in Brussels, bank depositors in Cyprus were to be subject to a one-off levy of up to 10% on their savings (this rescue plan has since been rejected by the Cyprus's parliament). It is estimated that about one half to a third of all Cyprus bank deposits are of Russian origin. The suspicion - particularly in Germany - is that a lot of the money is from ill-gotten gains.
THE CARTOON A Russian "investor" is shown outside a Cypriot bank holding a suitcase crammed full of money. He is telling someone called Vladimir on the phone that "the washing machine is broken". We can tell he's Russian from the fur hat and coat. And by the fact that his friend or associate is called Vladimir (a Russian name). And, of course, by the fact that he's accompanied by a statuesque blonde with a poodle, and a snake around her neck!
EXPLANATION The "washing machine" is a euphemism for money laundering—the process of concealing the source of money obtained by illicit means. The man is using coded language to tell Vladimir that his method of laundering money is no longer viable due to the "deposit tax".
VOCABULARY 1. A washing machine is a machine that you use to wash clothes in. 2. A deposit is an amount of money that you pay into a bank account. • He made a £2,000 cash deposit on 5 April.
British finance minister George Osborne delivers another austerity budget to a country impatient with near-zero growth. Joel Flynn looks at the headline announcements and asks whether they'll help reduce the UK's £1 trillion debt problem.
TRANSCRIPT
REPORTER: Some will say it contains radical solutions. Others that it's just more of the same. British Finance Minister George Osborne has presented his plans for UK spending. GEORGE OSBORNE: "Today I'm going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them. It is taking longer than anyone hoped but we must hold to the right track." REPORTER: Key announcements included lower corporation tax, amongst the lowest in the world, a freeze in fuel duty and tax exemption for anyone earning less than £10,000 This was Osborne's fourth budget, and each time the government sticks to austerity it's popularity falls. These public sector workers are on strike over pay cuts. Osborne has boxed himself in with his commitment to fiscal austerity, and he's now looking to the Bank of England for some of the answers. The next bank chief Canadian Mark Carney will be able to favour growth over inflation. He'll also be able to use "unconventional policies" to encourage people to spend, and that could include negative interest rates. How to spur growth is Osborne's biggest problem. Growth forecasts have just been halved and borrowing projections increased. £2.5 billion pounds has been allocated for infrastructure projects. But developments like the high speed railway network take a long time to reap rewards. Opposition politicians weren't impressed. LABOUR PARTY LEADER ED MILIBAND: "They don't think growth matters but people in this country do and all he offers is more of the same, a more-of-the-same budget from a downgraded chancellor." GEORGE OSBORNE: "This is a budget that doesn't duck our nation's problems, it confronts them head on. It's a budget for an aspiration nation. It's a budget that wants to be prosperous, solvent and free." REPORTER: Market reaction was muted. Nick Parsons from National Australia Bank does not see any further downgrades on the cards. NICK PARSONS: "What he has said here very clearly is he's not borrowing for growth, he's actually financing the growth, he's financing growth by spending reductions in 2015 and 2016. Of course it remains to be seen whether those are going to materialise. But there's nothing here that's really I think would take ratings agencies rush for their red pencils and downgrade the UK again." REPORTER: But Government debt was also revised up too - it's now £1.19 trillion. And Osborne has just two years until the next election.
Like nearly all today's UK daily newspapers, The Daily Telegraph leads with the Budget, saying the Chancellor pinned the country's economic fortunes on housing, asking taxpayers to underwrite the mortgages of hundreds of thousands of people. Full story >>
VOCABULARY
If you pin your hopes on something or pin your faith on something, you hope very much that it will produce the result you want. • The Democrats are pinning their hopes on the next election.
