Uncertainity In Global Economy

Uncertainity In Global Economy

Length: 1365 words (3.9 double-spaced pages)

Rating: Excellent

Open Document

Essay Preview

More ↓
Introduction A student received his offer letter for the admission into GMBA course, he was working in Australia, so did quick calculation and came up with an amount that he was required to transfer in USD (US dollars) for admission fees. After two months, when he went to the branch of National Australian Bank to transfer the money to Citibank Dubai, he was surprised to know that he need pay around 35% more than his initial estimate ,due to increase in USD to AUD(Australian Dollars) conversion rate. At the same time, he was told in his office that going forward there will be not any office parties due to cost cutting. After being landed, he came to know that there is large scale layoffs’ going on the industry, so he needs to be extremely cautious about his future job prospects. To make the things worst, he came to know that shares of company named Suzlon that he bought had a free fall and now trading at 10% of their peak value. After two months, when he got the topic for the Macro Economics, he realised that reason for all his losses and worries is same as his topic of assignment that is “Uncertainty in Global Economy”. Reason for Uncertainty {draw:g} Flattening of the world has made this depression a global phenomenon. The core of this crisis is the defaulting of the payment by the subprime borrowers. Subprime borrowers are those borrowers, who are not credit worthy and cannot be provided debt in the normal scenario due bad credit ratings. In 1990s, financial institutions have came up with the new financial instruments to provide credit to wide range of borrowers despite of their bad credit history. The main motivations behind these financial instruments are:- a) Greed to earn more and more profit. b) Push from Federal Reserve’s to make USA a spending economy rather than saving economy. All the banking transactions are governed by simple rule “Higher the risk, higher the return”, so bank used to charge higher interest rate from the subprime customers than prime customers Insufficient regulations and failure of existing regulations like Basel 2. Lack of transparency of auditing firms and credit rating agencies. Lack of integrated global risk management practises.

How to Cite this Page

MLA Citation:
"Uncertainity In Global Economy." 123HelpMe.com. 18 Nov 2019
    <https://www.123helpme.com/view.asp?id=167974>.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Essay about International Trade and The Global Economy

- Free Trade International trade links countries to the global economy (Vollrath, 1991). The global economy needs free trade. Countries need free trade. Trade with other countries occurs at some level in every country globally. There may be some indigenous tribes within some countries that can lay the claim that they are self-sufficient, however, there is not a single country that can say the same. Proponents of an open trading system contend that international trade results in higher levels of consumption and investment, lower prices of commodities, and a wider range of product choices for consumers (Carbaugh, 2009, p26)....   [tags: Global Commerce]

Research Papers
1026 words (2.9 pages)

Essay about The Impact On The Global Economy And Key Nations

- 2.4 GFC Impact on the Global Economy and Key Nations The Global Financial Crisis had a significant impact on the global economy, causing global GDP to fall by 2.1% in 2009. FOOTNOTE The advanced economies experienced an unprecedented 7.5% decline in real GDP during the last quarter of 2008. 2.4.1 The United States In the United States, Economic Growth increased from negative 1.2% in 2008 to negative 3.7% in 2009. DATA WORLDBOOK In the wake of the crisis many worried about the future of the economy....   [tags: Economics, Economy, Gross domestic product]

Research Papers
1235 words (3.5 pages)

Solution to the Current Global Economy: Judaism and Economic Reform, by Norman Solomon

- ... Likewise and the topic of this paper Solomon provides a thorough discussion of the problems of the present global economy. In his essay Solomon provides three mind-wrenching questions that questions and supports his methods of economic reform. The first question of “is it possible to engage in the pursuit of wealth without succumbing to greed and selfishness?” brings the topic of morality when it comes to wealth (108). Sallie McFague brings an argument stating that human beings are people filled with emotions of self-interest and will do whatever it takes to become wealthy....   [tags: Judaisn, economic reform, global economy]

Research Papers
1119 words (3.2 pages)

The Growth of the Global Economy Essay

- Introduction 1 The Growth of the Global Economy 1.1 Globalization 1.2 The role of Technology 2 The Nature and Purpose of the Nation State 2.1 Ways in which the Nation State can achieve its Objectives 2.2 Examples of Successful and Failed states 3 The Nature and Purpose of the TNC 3.1 How specifically a TNC combines aspects of global, Multinational and International companies 4 The Relationship between the state and the TNC 4.1 Conflicting and Complementary Objectives 4.2 Ways in which the state/TNC each seek to achieve their objectives 4.3 The impacts of Globalization on the State and the TNC 4.4 Examples of the tensions between the State and the TNC 5 Influences affecting th...   [tags: economy, financial, organizations]

Research Papers
2375 words (6.8 pages)

International Transportation for a Global Economy Essays

- In a global economy, no nation is independently sufficient and is an intricate part of the different phases when originating trade or sell of product within the country. States must secure what it takes to produce more efficiently than their trade partners do to survive in the competition. The growth of freight being transported, as well as the variety of origins and destinations, promotes the importance of international transportation as a fundamentally sound global economy. Since the development of international transportation, and the distances involved, has created a greater demand for the maritime transport industry, port activities, rail transit, and motor transport....   [tags: martime, transport, economy]

Free Essays
600 words (1.7 pages)

Essay about Global Warming Is Good For The Economy

- The earth is getting unusual. We are encountering surge and dry spell in the meantime on the inverse sides of the earth. Liquefying ice on the North Pole and unusual atmosphere changes, storms, tropical storms, and tornados are not astounding news any longer. Why does this happen. Because of the quick creating of innovation, the way of life of people has been step by step simpler and quicker than at any other time. Rising temperatures mean melting ice and higher sea levels. Increasing heat could also help cause extreme weather like hurricanes, or make difficult living conditions for many species of animals....   [tags: Climate, Climate change, Earth, Global warming]

Research Papers
1398 words (4 pages)

Essay on Biopiracy and Bioprospecting: Managing in a Global Economy

- Cover page Biopiracy and Bioprospecting (graphic) Managing in a Global Economy MSOM 305 Summer 2010 Special Presentation Paper Team Group Project: /cover page 1. intro (stephan done; someone please proofread and initial) One of the hot topics currently worldwide besides the oil spill and the war in the Middle East are dealing with biopiracy and bioprospecting. Currently there are drastic measures being taken worldwide in various countries that are attempting to protect the indigenous knowledge of that country in the battle....   [tags: Global Economics]

Research Papers
1287 words (3.7 pages)

Globalization: Disjuncture in the Global Cultural Economy Essay

- The idea of globalization includes a variety of different aspects of economic, political, and societal life. In order to question of whether or not globalization has a progressive or downbeat influence in our contemporary world, we should look at different perspectives of component of globalization. According to Marx and Engels, globalization can be raised from capitalism, which a class struggle between who own the means of production and those who work for a wage exist. Throughout a development of cooperative resist on the part of groups of people with similar economic situations, they argue that capitalism brings optimistic and pessimistic impacts into our modern society....   [tags: International Free Trade, Global Commerce]

Research Papers
1330 words (3.8 pages)

Global Economy Essay

- Global Economy’s Impact on Labor The global economy has had great impact on the labor force, affecting each country in its own way whether it deals with outsourcing and offshoring or unemployment. The term global economy means integrating the world economy through trade, production, and distribution while consuming goods and services. Globalization has progressively integrated its way into all countries and the United States has seen that on the rise with diverse ethnic, economic, and religious groups that work together in everyday tasks....   [tags: Impacts, Labor Force, Economy]

Research Papers
1369 words (3.9 pages)

Global Warming, the Kyoto Protocol, and the Global Economy Essay

- Global Warming, the Kyoto Protocol, and the Global Economy      As the amount of greenhouse gas emissions increases a plan of action has been introduced, know as the "Kyoto Protocol." As of July 2002 seventy-six of earth's one-hundred ninety countries have agreed to cut their emissions under the "Kyoto Protocol." However, only Japan has set some goals, that currently seem unattainable. Many people and businesses are opposed the Kyoto Protocol.      Climate change is a serious, global, long-term issue that must be addressed immediately....   [tags: Environmental Global Climate Change]

Free Essays
1078 words (3.1 pages)

Lack of ethics and dishonest players. Equity Debt Currency Assets The improper valuation of above mention instruments lead to large scale impact on the world economy and further lead to uncertainty in the world. The effect of uncertainty is described below:- There will large scale withdrawal of money from equity market, which will lead to liquidity crunch in the equity market. Foreign institutional investors will take out money from the emerging equity markets, which will lead to slow economic growth of emerging markets and transmitting of uncertainty effect in the emerging markets. Many of the institution like pension funds losing their investments in the equity markets, which will pass the economic crises to common people. Companies will delay their delay their Greenfield and brown field projects due to uncertainty about proper valuation in the equity market. Debt:-Debt is life line for any enterprise. Debt helps the company to fulfil its long term (CAPEX) or short term (OPEX) requirements. In the present scenario, when most housing backed debts in US are going bad and property index is very high, most of banks have stopped giving loans due to the uncertainty about the future repayment of the loans. Prime customers have defaulted the loan payments due to drastic fall in their property prices. The bad debt market has resulted in the downfall of some of the biggest banks of the world like Citibank, Bank Of America, UBS, RBS etc.The lack money in debt market is resulting in following impact on the economy:- The debt markets have reached to their lowest levels, in terms of transactions and total net worth. Corporate customers are facing the credit crunch and not able to expand due to lack of capital. Currency: - Presently the currency trading is suffering lot of unpredictability. Few of the currencies of the world have reached at their lowest level and fluctuating. The impact of currency fluctuations are as follows:- Large scale uncertainty regarding the profitability of outsourcing firms. Unbalancing of the imports and exports that may impact the local as well as foreign firms. Uncertainty regarding the net amount of investment required to be done in the foreign firms. Large scale remittance and pulling of funds by FII. Oil Prices:- Oil is the most traded commodity of this world. Due to the uncertainty, the global prices fluctuate a lot and this further enhances the uncertainty in the global economy. Decrease in GDP of most of the countries. Decrease in government’s spending on the environmental related issues. Decrease in spending on the research and development activities by the companies. Decreasing in the FDI and FII generated flow in most of the countries. There is large scale withdrawal of funds in most of the countries. Transformation of Global Economic System:- Last 20 years, global economies are marked following major factors that changed whole global economic scenario:- Reduction in the regulations that limits the cross country trades and providing the level playing field to all the factors of the production. Emergence of global trading blocs like NAFTA, European Union, AEAN, G-20 etc also accelerated the flattening of the current world economic scenario. There was a constant shift from the socialistic form of the government to the capitalistic form of the government. There was a large scale development in the information technology, which also helped to remove the information asymmetry caused due to the time and geographic differences. All the above factors lead to the flattening of the world and making the world a single integrated global financial market. But after the current economic meltdown different government are taking steps, which may take lead to segregation of the world again. The various steps that government has already taken or hinting to take will only have very short term positive impact but in the long term these problems will only worsen the problems. The various steps that various governments are taking that creating the environment of uncertainty are as follows:- Government Bailout Packages: - Present days government policies are motivated by “Privatisation of profits and socialisation of losses”. The bailing out of various banks and insurance companies is totally against the principals of free markets. The remarkable drift in the government policies has created a sense of uncertainty regarding the government’s role in the economic scenario. This again is hinting towards the movement from capitalistic form of the government to the socialistic form of government. Regulation against the Outsourcing: - The current bailout packages have a important component that limits the companies to outsource their work to the developing countries. This has created a sense of uncertainty for the global companies and likely to kill their competitiveness. Implementation of Environment related regulations:-Most of the developed countries are not willing to accept the regulations that are aimed at improving the environmental conditions on the world. This creating a sense of distrust among the developing countries. Conclusion:- The present economic crises has pointed that there is a need of the comprehensive and integrated framework to avoid any sort of uncertainty. It should be more of the process oriented and not people dependent. Earlier the uncertainty was more people oriented, for instance Allan Greenspan single handily deal with the economic crises like Black Monday) October, 1987 stock market crash, dot com burst of March 2000 and post 9-11 scenario. Uncertainty and trust can be treated as two sides of the same coin, if we have the trust for the system then that will automatically generate the feeling of the certainty in the system. We can aim to develop certainty and trust in the current economic scenario by following below mentioned three step approach:- {text:list-item} {text:list-item} {text:list-item} In the process of removing the uncertainty and building the trust in the economic system each of the above mentioned point needs to be carefully considered and suitable action should be taken to deal with them.
Return to 123HelpMe.com