Compare Living standard using statistics ...

According to the statistic information of National income in 2003, the USA became the country in the world having the highest Living Standard, with the Gross National income reached into 11 012.6 million dollars, and the Americans had the highest efficiency in production as well with the Gross National Income per capital was at 37 870 dollars. In the South of America, Colombia achieved 10.1 million dollars in Nation Income, which is equal to 1% of America and the Productivity was 6 410 which is much lower than the USA
In the European countries, the British economy was at the top high National income with the high Gross National Income, which was 1 680.1 million dollars and high level of efficiency in production. Another large economy in the Europe is Russia Federation: with the high level population and the large area of land, Russian Federation‘s Gross national Income was 374.8 million dollars in 2003.
On the east side of Europe, Czech Republic was achieved 72.9 million dollars. Even their achievement is lower than the Russian, but with the lower factors of endowment, small area, average level of population, they still achieve a good level of National Income and the Productivity is much higher than the Russia Federation when the Gross national Income per capita was at 7150 million dollars compare to 2610 million dollars of Russia.
In South East Asia, the National income of Indonesia in 2003 was 173.5, which is a high level among the Asian countries. In south Asia, Pakistan was achieved 77.6 million dollars, which is less than Indonesia but the efficiency in production is higher with 4 690 dollars per capita compare to 3 210 dollars of Indonesia.
In fact, consider and comment on the Living standard of a country we do not only just base on the information of National Income. Living standard which mean is the average quality of living of people. So the National Income is the result of the combination of all people in a country. And how the National Income affects the Living of people, it much depends on the strategy of the Government in spending. So living standard doesn’t only depend on the National Income but strongly affected by another factors such as the distribution of income or education ...etc.
As we see in the National Income statistic, the USA is the country having the highest national income. But the gap of Income distribution between High Income Group and Low Income Group is very large. The distribution of income into the lowest income people is 16.1% when the highest income group take into account 68.2% in 2000. The inequality is described more in Population aspect. 78% is the percentage of the concentration of people in cities and in the Communication aspect, the Internet users per 1000 people in 2003 was at 119. The number of people using internet in the USA is low if compare to UK with 658.9 or in New Zealand – 413.8. We might connect the high level of people living in city and the low level of users of internet. The low level of people using internet in country side can be the reason that pull down the level of people using internet in America.
Colombia is at the top of countries having the lowest National Income. But we can’t conclude that the Living standard of Columbians is bad. The percentages spending of Colombia on education in 2002 reach into 5.2 % or National Health Services, which is the high level of spending if compare to UK or Indonesia, countries achieved the higher National Income. So that, people there is receiving a good Living standard when the Government concentrated on Education and people doesn’t worry about their health services.
In Asia, Pakistan has the National Income at 77.6 million dollars – which is 2 times lower than Indonesia. But Pakistan has a great achievement of technique in production. With the level of productivity at 4 690 dollars per capita, the low level of energy per capita, which was at 454 kg of oil equivalent, Pakistan could save a lot of money from solving negative externality caused by pollution, or the money they saved from production by using efficiency resources is really considerable to distribute to other sectors in the country such as health care or education.
In Europe, the UK can be an example to show that living standard doesn’t just rely on the National Income. UK has the high level of National Income, which is 1 680.1 million dollars, but it has to face with a lot of problem as well. The old population of UK is now the difficult question for the government when there was the slow growth from 1990 – 2003 was at 0.2 %, and the percentage of population aged +65 was 16 % - the highest level among 10 countries surveyed. In the other hand, British people in some aspects are having the higher living standard if compare with the USA – which has the highest level of National Income. The contribution to the high living standard of UK is the high level of spending of the government on education and health care services. The communications of UK is good as well when the statistics in telephone mainlines, telephone per 1000 people or Internet users is always at the high level.

Who else gained from the recession ?

We are now living at the really excited time. All of the banks in the UK are now having the financial crisis, at the same time. This is the situation that has ever never been in history. The recession is soaring and seems to be unpredicted about the end. People’s confidence and expectation about the economy is falling to the lowest point. Investors are now withdrawing away from the economy.

But it’s not hopeless about getting advantage from the situation. I think that, people who are flexible in market share prices and have little bit lucky, can earn a lot of money. Let’s take a simple example in real life. Most of us tend to buy more, or just buy things when the prices of them are at the lowest. You often buy clothes after Christmas, when the prices are discounted into 70%. It’s same with the share prices. When the business is not doing well, investor’s confidence is low, then they will withdraw their money and massively sell it. And when the prices of shares become cheap, it’s now the time for people to make the choice. In my opinion, company which has big affect on the economy is a good choice, because the government might not let the company go into bankrupt due to its strongly effect. An example is the AIG in America. When the price of share of AIG reaches its warning low point, the supply of shares of AIG was increase very fast while people expected the continuous falling in its share price. But finally, the American saved this company and this company turned over the difficult time to reach the growth after that. So a lot of people were profited by buying shares at the right time.

Why is the pound falling ?

Firstly, I agree that the falling of the Sterling is most caused by the recession in UK now. To deal with the fall in consumer and investor confidence, the MPC has been dropping the rates of interest to the lowest level that we’ve ever seen before, with the aim of pumping cash into the flow of credit in the market. As we know that the interest rate influences the exchange rate because it influences the demand and supply of currencies on the foreign exchange. By cutting interest rates, the immediate result received is the withdrawing of foreign currencies away from the market. Traders tend to move from one currency to another to take advantage of price movements or take advantage of better return in other countries. It leads to the increase in the demand for foreign currency such as Euro and Dollar and the Supply of Sterling increases as well. Therefore, the value of Sterling falls.

With the low exchange rates, UK traders can decline the Trade deficit because of the increase in competiveness in foreign market when the price of exports becomes cheaper. But it might be a bad effect to the economy when the cost-push inflation occurs due to the rise in import prices.

The prices in house market can increase when the interest rates is set low. But it can’t be true for the UK economy in this circumstance. The world house market just experienced big failure leads to the recession spread over many economies and caused the fear of investors about another crisis in this market. So that now, even with the low interest rates that can make them easier to enter this market but with lack of confidence, they will tend to invest on production which is now strongly supported and encouraged by the government.

Measuring the National Income

How best to fight the recession?

While the cutting of interest rates into 2.5% last three months seems to be not efficiency to the recovery of the economy, now government is considering whether there will be a continuous cut. The main purpose of the government to boost up the economy now is to increase the consumption, investigation and production in the economy. So that, the government expected that with the low interest rates will lead to the rise in the flow of credit by borrowing money and then, boost the economy to go up again. But the debate about which parallel of rates is enough is now a hot topic for economists. Three members of The Times Monetary Policy Committee are calling for a cut into 1 percent, drastic cut over 3 months and this is a level not reached since 1694. But this idea is argued by other members while the large cut last three months just lead to a little effect on the economy. They assumed that increasing the flow of credit can be solved without cutting more rates by issuing a new policy to force banks to lend money with state guarantee. This suggestion reached into the crux problem of the economy because now there is a lending drought that leads to the loss of confidence of many parts in the economy. Mr Pennant-Rea,former Bank Deputy Governor, agreed. “The best option is for the Government to guarantee bank loans, for specified purposes and for a limited period. It is high time the monetary debate concentrated on the banks.