We are all economists…the BoE crash course

by | Apr 23, 2024

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On an exploration for wider reading, IFA Magazine’s Senior Financial Journalist, Jenny Hunter, finds a surprisingly useful crash course in economics published in a book by none other than The Bank Of England. In this article, she explains why she thinks it might be of interest to IFA Magazine readers too. 

Whether you’re just starting in the industry or are considered long in the tooth of financial services, everyone needs a solid grasp on the basics of economics to be either a financial adviser or a paraplanner. Or a functioning member of society really.  

Having been in the industry for more than ten years, becoming chartered in 2021 and recently having undertaken an examiner position for the CII, I know the importance of exams and qualifications. Firstly, you must have them to be an adviser (they make you do them!) and secondly, they are fantastic tools for learning the technical theories and concepts specific to financial services. 

What they don’t do, is provide general knowledge on topics such as economics that are a vital base to all that extra technical information. They also often aren’t easy to apply to day-to-day practical scenarios such as client conversations or understanding how the economy really works. This has to come from either experience, (which takes a long time), or wider reading. Without those things, we end up with a lot of smart and well-educated people who struggle to relate to clients or understand how things operate in the real world. 

 
 

I can’t stress enough the importance of seeking out and digesting reading or content that is not solely technically focused. We all have to do CPD, but it doesn’t always have to be a webinar on bond calculations. 

On my hunt for more palatable reading, I stumbled across Can’t We Just Print More Money written by Rupal Patel and Jack Meaning who are economists at the Bank of England (BoE) and which starts with a foreword by the existing Governor of the BoE, Andrew Bailey. Before you scoff at what seems like a very simplistic publication, I would be astounded if you read it and do not learn something new from the ten lessons it provides, I certainly did. 

Plus, they actually managed to make it relatable to mere mortals and in parts it was incredibly funny, in a dry economist sense of humour kind of way – no small feat considering a former Chief Economist describes “an economist with strong social skills is one who stares at your shoes rather than their own when engaged in polite conversation.” 

 
 

Here’s a little taste of what you can expect. 

Sweetie sagas

An explanation of supply and demand with a Woolworths pick and mix example thrown in. There is talk of price elasticity, cross elasticity, and marginal impact for those who want it. But also, explanations of more nuanced ideologies like why “the cost of something is not just what you pay”. 

 
 

We finally get a straight answer to this most important question. Why aren’t Freddos 10p anymore? This example looks at the impact of inflation and why the rate of inflation differs for each individual and represents the change in their personal cost of living. One size does not fit all in the world of inflation! Certainly, one to help with those client conversations. 

When the chips are down

Some focus is put on to how and why markets fail, as well as “why economists always take too many chips” and why “so many people just use Facebook.” For those of you out there who may have thought market monopoly is always a bad thing, think again. 

 
 

So, what actually causes an economic crisis? The answer is…not just one thing. The authors explain what a Minksy Moment is and what economists and weathermen (sorry Michael Fish) have in common. 

We also get treated to a section on the power of trade, and why there was a shortage of bras in 2005. It asks important questions, like, is specialisation a good thing, in both physical trades and also services.

Me, myself, and I 

 
 

It’s always good to have a refresher on GDP and economic growth and especially why each person in France would get a bigger slice of birthday cake than each person in India. The question posed to the readers….is growth always a good thing?

Even better is getting advice on how to get a pay rise. Apparently just asking for one is not a good idea and doesn’t work. We find out where wages come from and why improving your skills and value to an employer is the key. They slip in a Simpsons reference to demonstrate what the impact of automation (aka killer robots) could be for us all. 

Money money money money…money  

 
 

You can expect a deep dive into the history of currency, how you define it and why cryptocurrency may be taking us back to the Gold Standard. Plus, how you can get the sort code 10-00-00? And why would you want it?

Being written by the BoE, you can expect a bit of information on, well…banking. It may seem self-explanatory, but the benefits of banking aren’t sometimes obvious to all, as a funny (yet frightening) story about a family in Tel Aviv will demonstrate – eek! You will find explanations on how banks and the central banks operate and why they are a great thing – well they would say that wouldn’t they?

The final question and overarching theme of the book looks at monetary policy such as quantitative easing. It also explores the concept from John Maynard Keyes, that it may be “better for the government to pay people to bury money in a hole, dig it up and then pay them to fill the hole in again, than to leave people unemployed. Perhaps a good point, but it immediately brought to mind a high-speed rail network currently under construction!

 
 

A job well done

This is well-written, accessible, and funny, and that is hardly ever the case for an economics book. 

For some in the industry, it may seem like old news, but it never hurts to get a refresher on the basics, if for no other reason than to remind ourselves of what we know. If you think you know everything, then you are likely a ’know it all’ – nobody wants to be that person. Read the book! 

 
 

Or if you don’t want to read it then buy it for your friends, family, new starters at work or even your clients. There are no downsides to learning more about the economy we all live, work, and retire in, or in our case, the one where we help our clients do that too. 


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