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The Global Economy GRBU 530-61

The Global Economy GRBU 530-61. Four Parts Economic Concepts International Trading System International Financial System Case Studies – steel, countries, energy issues. . . to be determined. Course Requirements. One mid-term take home problem set (15%)

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The Global Economy GRBU 530-61

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  1. The Global EconomyGRBU 530-61 Four Parts • Economic Concepts • International Trading System • International Financial System • Case Studies – steel, countries, energy issues. . . to be determined

  2. Course Requirements • One mid-term take home problem set (15%) • Two mini papers (20% each - total 40%) • One final exam (35%) • Class Participation (10%) Slides on-line . . . http://theglobaleconomyduq.wikispaces.com/ • But take notes!

  3. Contact Info Instructor: Jonathan Hill Phone: 412-613-1716 E-mail: hillj2@duq.edu Other issues . . . . - Final Exam: Thursday April 26, 2012 - Library e-Reserves password: global - No cell phones or laptop browsing . . . . - Check your Duq email – forward to another email if necessary

  4. Goals • Think like an economist • Use data appropriately • Present data carefully in graphs and tables • Use economic tools carefully • Understand limits to economics, especially forecasts • Limits to the accuracy and comparability of international economic and financial data • Beware overly accurate forecasts and overly elegant analyzes – Be cautious

  5. Current Situation The ongoing economic/financial international crisis began in earnest in 2008 . . . . . . . and was caused by: • Rapid increases in asset prices in real estate and related financial instruments right up until the 2007/08 credit crisis. • Deregulation • Government intervention – eg; Fannie Mae and Freddie Mac • Hubris • Greed • Fear, etc – at all levels of the economy

  6. Current Situation • Crisis became international very quickly • US crisis followed by a European crisis • The US economy has undergone a substantial de-leveraging process – much debate over data on housing and preferred direction • Deflationary period for housing especially in four key states – California, Florida, Nevada and Arizona - Likely not over despite wishes • Short term Interest rates dropped very quickly – resulting in a steep yield curve that remains • Relatively limited access to credit remains because of the uncertainties in government policies and intent

  7. The Housing Bubble

  8. Globalization . . . . Has helped: • Maintain low inflation • Allowed for rising prosperity for industrialized nations • Provided for economic development and opportunities

  9. Globalization . . . . Characterized by • Technology transfer • Increased productivity • Other cost reductions achieved in part through shifts in manufacturing

  10. Globalization . . . . The downside: • Outsourcing of jobs and production leading to at least short-term economic dislocation • Can sometimes dramatically spread the effects of speculative bubbles

  11. Globalization - But, doesn't necessarily lead to loss of industrial base, or . . . . economic chaos and financial collapse - Globalization need not be a zero sum game

  12. Drivers of Globalization • Technology (not just the internet) • Communication (not just the internet) • Lower transport costs • Search for economic rewards – Supply and demand drive economic and financial incentives • The influence of economic fundamentals such as comparative advantage

  13. Drivers of Globalization (cont.) Institutional developments • Bretton Woods Agreement 1945 • IMF • World Bank • Regional Development Banks • BIS • GATT/WTO

  14. Drivers (cont.) • Lower trade barriers • Development of a broad and deep international financial system • Sovereign actions • Bilateral trade agreements, trade financing, OPIC • Migration and other natural events

  15. Economic Systems Come in many forms: Free Market Market oriented Communism National Socialism Socialism Statist Market Socialism Etc. All have to deal with Globalization in some way...

  16. Information Resources • International Financial Institutions • IMF, World Bank, WTO, NGOs • USG - Fed, Treasury, Commerce (ITA, Census), USTR, ITC, • Media • Bloomberg, WSJ, FT, Economist,

  17. G 20 Issues • Global Recession/Financial Crises • Asset Bubbles • Currency issues • Interest Rate Policies • Trade negotiations • US Budget deficits and impact on world economy . . . . • Bank regulatory changes

  18. G20 Member Nations

  19. Understand what terms mean and don't mean, such as • Globalization • Sustainable development • Trade • International Lending and capital flows • Barriers to Trade

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