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The Global Economy

The Global Economy . The United States and the World. Global Trade Affects Us All . True or False? In the United States it would be unusual to ride in a bus made in Japan? We not only live not just as Americans, but as part of the global economy

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The Global Economy

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  1. The Global Economy The United States and the World

  2. Global Trade Affects Us All • True or False? In the United States it would be unusual to ride in a bus made in Japan? • We not only live not just as Americans, but as part of the global economy • Global Integration: Interdependency among the countries of the world, especially within financial markets and telecommunications • Telecommunications: Long-distance electronic communication

  3. Improved Telecommunications • First Transatlantic telegraph completed in 1866 • With the invention of the semiconductor- computer-chip telecommunications took off • Other inventions as well: communication satellites, Radio and TV wave, Fiber-optic cables and internet • Before the 1990’s all TV and Radio in the Eastern Hemisphere was state run and state controlled

  4. Viewers in other parts of the world are changing their habits • India: they buy outfits worn by popular music television performers • More of the world’s people want to learn English as a 2nd language

  5. Globalization of Financial Markets • Because of the speed and power of computers and affordability of telecommunications, the world has become one financial market • Started in the 60’s and 70’s when U.S. banks developed worldwide branch networks of loans and foreign exchange trading

  6. Problems with Worldwide Stock Market • When each country’s stock market is linked worldwide, problems can arise • Stock Market Crash of 1929: Great Depression • Stock Market Crash of 1987: Dow Jones fell 508 points, largest one loss in U.S. History • Less than 7 hours more than $500 billion corporate value disappeared • Global financial market causes everybody everywhere to feel affects of panic

  7. Who Owns Whom? • Nothing seems more American than Burger King now owned by the British • Japanese own over 30% of office space in downtown Los Angeles • Indonesian firm owns Chicken of the Sea Tuna • German company owns Aldi’s • British company owns French’s mustard • Germany company owns Reebok • Japanese company owns 7-Eleven

  8. Foreign Investment Then and Now • Direct Foreign Investment- purchase by foreigners of real estate and businesses in another country • Some Americans want to restrict it • Great Britain was the biggest foreign investor in the American railroads in the late 1800s and early 1900s • Many people argue against foreign ownership of American companies because they are worried about foreign control

  9. Foreigners own about 27% of all U.S. government securities (short and long term debt) • Does the U.S. government have more control over foreigners? • Yes, because they own 27% of U.S. public debt, they are subject to U.S. policy • Government could wipe out the real value of the U.S. debt that foreigners own by creating tremendous inflation

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