Is Grexit finally off the cards? Sam Bowman argues NO in the CityAM Forum debate

Deputy Director Sam Bowman argues that even as Greece pushes closer to a debt deal, a Grexit is not fully ruled out yet:

Greece is in not one, but two holes. It owes €330bn (£237bn) in national debt, equivalent to 196 per cent of GDP, and its nominal GDP is also at a 13-year low. This means that unemployment cannot come down rapidly, as it has in the UK –where nominal GDP grew healthily after the crisis – so nominal wages will have to fall to a “new normal”. That takes an agonising amount of time, because firms prefer to sack some workers instead of cutting wages across the board. Greece’s future, then, looks to be one of persistent high unemployment. Before this is addressed the country cannot hope to overcome its economic malaise – it is simply not credible to expect supply-side deregulations to deliver the sort of growth Greece needs without a healthy level of nominal spending. That means no solution to the debt problem either. If Greece stays in the Eurozone, it will be on life support for the foreseeable future. It’s hard to rule out Grexit just yet.

Read the full debate here.

ASI comments on the latest CPI figures feature in Newsweek

Head of Research Ben Southwood’s comments on the latest CPI figures feature in Newsweek.

This is the first time the UK has entered deflation since official records began in 1996 and the first time since 1960 based on historic estimates.

However, Ben Southwood, head of research at the Adam Smith Institute, said the negative figures should be embraced by consumers.

“We have deflation – albeit extremely mild deflation – for the first time since the 1960s. But this seems to be ‘good deflation’, coming mainly from cheaper goods – especially cheaper oil – rather than a drop in consumer demand,” he said.

Southwood added that the Bank of England, which has set a target of 2% inflation, should remain vigilant against bad deflation.

Read the full article here.

Sam Bowman’s comments on the removal of Adam Smith from £20 notes feature in The Daily Mail

Deputy Director Sam Bowman’s comments on the Bank of England’s decision to replace Adam Smith on £20 notes feature in The Daily Mail:

The change could leave Scotland with only one representative on Bank of England notes, inventor James Watt, who appears on the £50.
Sam Bowman, of the think-tank the Adam Smith Institute, said: ‘It’s a great shame that the bank is removing Adam Smith from the £20 notes.
‘Smith is not just the father of economics, he is in many ways the father of the modern industrialised world.’

Press Release: This is good deflation – no need to panic

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: kate@adamsmith.org | 07584 778207

Commenting on the new UK inflation figures, Ben Southwood, Head of Research at the Adam Smith Institute said:

We have deflation—albeit extremely mild deflation of 0.1%—for the first time since the 1960s. But this seems to be ‘good deflation’, coming mainly from cheaper goods – especially from cheaper oil— rather than from a drop in consumer demand.

Economists worry about deflation, but only the ‘bad’ kind, when prices are sliding at the same time as wages and output. Bad deflation makes debts harder to bear, puts people out of jobs, and can lead to a downward spiral. Good deflation, when wages and output are rising steadily, makes everyone better off.

Though the Bank of England should stand vigilant against bad deflation, and ease policy if markets think it is coming, it should hold fire right now as UK employees enjoy real pay increases for the first time since before the recession.

The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.