Overview of the Global finance and the economy
1980s and 1990s had witnessed the rapid integration of global economic systems. To improve the global economic system, countries made move to deregulations the foreign exchange markets. In 1985, Japan made move to deregulate its stock markets and this had been followed by the London stock exchange, which started to admit the foreign firms in 1986. Thus, deregulation of financial markets provided the competitions among the financial services and financial innovation that saw the introduction of various financial instruments across the globe.
The increase in the competition of financial instruments contributes to the liberalisation of international trade that has been the links between national economies across the globe. The trade liberations between nations increased from 7% in 1950 to 19. 7% in 2001. Although, the rate at which the trade grew among countries were different to each other. The German trade grew from 6. 2% to 31. 2%. Taiwan international trade grew from 2. 5% to 45. 2%. However, countries such Argentina and Brazil had relatively low international trade.
(Eun, Resnick, 2004). Thus, in the early 2000s US and other advanced countries experienced increase in the economic boom. For example, the world stocks increased a substantial growth from $521 billions in 1980
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Nevertheless, the present global economy and financial system have lagged behind in the last few years. The present global finance and economy situation show that there are global economic problems due to the US economic crunch. In the FY2008, there has been global economy challenges, the US economic problems have spilled over to many advanced countries in the recent years. However, with increase in the US financial crisis, many industrialised countries are experiencing the economic slow down, and squeeze in the credit markets.
It has been revealed that in the recent years, there has been slow in the economic growth of various countries that mostly rely on US markets. For example, there have been inflationary pressures on the prices of foods and oil in the major world market, especially many low-income countries. (International Monetary Fund, 2008). In the mid-2008, the effect of the global financial crisis started to show its effect with the collapse of major large financial institutions.
Thus, it has been revealed that with fallen of some financial institutions around the world, the effect has led to the fallen of many stock markets around the world. While there are economic, boom in most advanced countries especially in the early 2000s and towards the end of 2007, a collapse of US economy has led to the collapse of major financial markets. For example, the report in the London markets reveals that there has been dropped in the mortgage market in the last few years. The UK mortgage markets have been experienced considerable boom since the last 20 years.
With the weakness in the industrial economies, some financial products and instruments have become complex to operate for the improvement of global economy. (Ritch World , 2008). The present global economic crunch among the top nations has led to the intense debate among the scholars whether there are any benefits in the global economic and financial relations among countries. While, some group of scholars argue that global economic investment reduce poverty and improve the standard of living of the people across the globe, and has enhanced the world economic development.
For example, there has been evidence of reduction of the numbers of destitute people across the globe. World Bank data has revealed that the world poverty fell from 1. 5 billion in 1981 to 1. 1 billion in 2001. ( Ball, et la 2005). Ball, et la (2005) argues that global economic and financial system have improved the flow of businesses across borders. However, there are scholars that challenge the notion of globalisation. According to them, the present global economic system has resulted to human right abuses and lost of jobs. ( Ball, et la 2005).
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