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Globalization Age Final

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Economy on Globalization age
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    International Society in the Globalization Age Final Essay The economic system in the world has already undergone numerous changes throughout history. It developed from simple trading system such as barter unto speculation money game of investment and interest, the biggest change was made when the idea of capitalism and capital money were introduced just after World War 2 which was incited by industrialization.At that time, business cycle was running smoothly as company owners were using their liquid money to buy materials and hire labors, then using both resources to  produce commodities to make some profits which then these profits go right away to buy more materials and expanding their business. This kind of cycle which the author referred as the traditional capitalist cycle was keeping the economy and production wheels steadily rolling, but even though the capitalist able to increase their production quantity by increasing their input to efficiently respond to market demand but human labor force can’ t keep up with it. Despite the claim of the “Great Moderation” in 1980s as new economic system was rising which gave persistence GDP growth and absence of inflation, but as the industrial reserve army is completely absorbed and the continuing demand of labor power puts a strong upward pressure on wages which sends profits on a downward slides, even the rise of MNC and ICT was unable to provide healthy profits and productivity growth as most of these companies experienced weak profits or even negative revenues. With profits in the  production centered economy was falling across the board, business begun to close and capital moved to other pursuits such as real estate and speculative activities, then banks increased their interest rate as the risk of lending was increasing, however this only offers further inducement for capital to move from production centered activity to shift toward speculative endeavors. This phenomena was bringing huge effect to US because US was the center of the economy at that time as the US trade deficit continuing to widen from 1996 until    2000 which then in turn caused the current account deficit as a whole was growing larger, then the government debt was slightly declining as a percent of US GDP, though total public debt was exploding between 1994 until 2004. All of these conditions added up causing huge inflation and ended up as economic crisis and depression which two of these crises are the “Black Monday” and “Great Depression” , these crises have shown that the real economy  business cycle is in the down turn exacerbated by the long phase of capitalist development running in its course. This is the time when banks step in by flowing out money from their reserve to industries to keep them alive, but this action squeeze out the banks deposit of money as in effect, banks try to attract their deposit by increasing their interest rate which then encourage high risk investment in everything running the gamut from commercial real estate to ski resort as passive saving that people can draw money from when needed. The involvement of bank in the economy system bring a huge change in the economy system as the government and banks putting various fiscal policies and deregulations to support capital accumulation, the role of all these extra economic forces is to put an economic  programming such that the new orientation of finance of global economy will turn on US global dominance. At this point, the real economy of production and trade are only a sideshow, after dominating banks start to devour smaller bank thus creating larger pooling of idle money, then come the vicious cycle of idle money, money lending, and interest, moreover, these big banks accommodate the ability to transfer around huge amount of money overseas,this condition also get worsen as these funds are seen as an asset with price in form of interest. But as the amount of idle money continue to increase without limit are used as lending resource, it begins to resort to speculative activities in stock market, these activities  plus inability of human labor force to keep up with economy growth causing a cycle of assets  bubbles and bursts.    Because the fact that US is threatened by bubbles and debts, it needs a steady stream of money to support its growth. But as stated in the book that US itself absorbed huge amount of international capital inflow, this happens when dollar denominated financial instrument are offering only average rates of return, such flows constitute global idle money passing into US though the rigged global game of dollar.The main part of this game is by fomenting global meltdowns to impel idle money from across the globe back to US where they are so desperately needed to finance US economy which can be done by US finance’s domestic  bubble blowing and bailout mechanism, frankly speaking, it is constituted by orchestrating  bubble burst and playing with domestic currencies,for an easy case, we can look at Asian crisis which is caused by US blowing bubble and playing with yen in Japan. As Japan hanging on production centered economy thus providing a robust economy growth, it is  become prominent that Japan threatening Wall Street’s money game with all those dollars flowing into Japan, and then US lawmaker stepping into the stage by forcing major holders of saving to purchase US T-bill IOUs by lowering the interest rate to the point where saving in yen denominated instrument became disadvantageous. As well, under US srcinated compulsion the liquidity low interest rates injected into the economy causing stock market frenzy and disturbing Japanese steady economy and bubble burst in Japanese stock market, this condition gives dual effects as suppressing inward foreign capital flow by devaluating domestic currencies and giving opportunities to buy shares in stock market just to be repurchased in high prices thus yielding huge income and minimal outward capital flow for US. Even in the internet, there are some articles and reports based on this issue, for an example, an article in business.financialpost.com mention that basically, the cycle of bubble     bursting was allowing US to “borrow” more money as dollars flow inward to US 1 . Even americasbubbleeconomy.com delves to this money game deeper as stated in one of their report which telling people to avoid real estate price fluctuation, irrationally exuberant stock market, long term bonds funds, and adjustable debt rate as these are parts of the vicious money game 2 . internationalviewpoint.org also released an article which talking about how these long term bonds funds and adjustable debt rate are integrated real estate business, it is integrated such that every single consumer who is taking business or as consumer in real estate business will need to make contact with long term bonds funds and adjustable debt rate 3 . As we can conclude from this essay that the business cycle right now is changed from the traditional capitalist business cycle which based on production centered activity and real economy to a cycle which is basically based on money game as it is centered on stock exchange market, share, and domestic currencies such that idle money flowing into US to support its economic growth. 1 http://business.financialpost.com/2013/04/01/fed-fuelled-bubble-will-burst-into-economic-chaos-warns-former-reagan-aide/ 2 http://www.americasbubbleeconomy.com/ABEspecialReport100306.pdf 3 http://internationalviewpoint.org/spip.php?article1332
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