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Globalization’s Achilles’ Heel
A loss of confidence in U.S. financial markets could be calamitous. But just possibly, we're at a crucial—and desirable—turning point. For several decades, the U.S. economy has been the world's economic locomotive. Americans borrowed and shopped; the U.S. trade deficit ballooned to $759 billion in 2006, stimulating exports from other countries. The trouble is that this pattern of growth could not continue indefinitely, because it required that Americans raise their debt burdens indefinitely. Fortuitously, then, China and other emerging markets may be moving beyond export-led growth. There are signs that their economies are "increasingly driven by domestic investment and consumption," say economists at Deutsche Bank. But these signs could prove false, if high inflation (8 percent in China and India) derails domestic expansion.
Today's global economy baffles experts—corporate executives, bankers, economists—as much as ordinary people. Anyone who says differently is either deluded or dishonest. Countries are growing economically more interdependent and politically more nationalistic. This is a combustible combination. The old global economy had few power centers (the United States, Europe, Japan), was defined mainly by trade and was committed to the dollar as the central currency. Its major countries shared democratic values and alliances. Today's global economy has many power centers (including China, Saudi Arabia and Russia), is defined by finance as well as trade and is exploring alternative currencies to the dollar. Major trading nations now lack common political values and alliances.
It is no more possible to undo globalization than it was possible, in the 19th century, to undo the Industrial Revolution. It is not a choice so much as a condition. But we should recognize that its intellectual and political foundations have weakened and that the practical problems transcend the debate of "free trade" versus "protectionism." Globalization has occurred so rapidly that we understand less about how international markets, shaped by impersonal economic forces and explicit political decisions, operate. Countries try to maximize their own advantage rather than make the system work for everyone. Considering how much could go wrong, the record is so far remarkably favorable. Alas, that's no guarantee for the future.
© 2008
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Member Comments
Posted By: Jack999 @ 07/24/2008 2:23:19 AM
Comment: Us economic looks bleak ahead,this why americans must realise their American Dreams slipping away day by day since depression days.The troubles of mortgage finance giants are pushing up home loan rates to their higest levels in five years.While the us inflation is up since 17 years.the average interest rate.
The average rate for very big,so called 'Jumbo Loans' which cannot be sold to Fannie Mae and Freddie Mac was 7.8%,the highest since December 2000.
Loan rates are rising because of concerns in the financial markets about the future of Fannie Mac and Freddie Mac,which own the guarantee nearly half of the nation's US$12 Trillion mortgage markets to foreign bond investor.
The Washington can only try to stablise the Market by adding the cost is being passed on to comsumers via mortagage markets when,the the time US have the highest inflation ,unemployments,when personel income become flactuate.The rate hike is the greatest concern to home owners,whose mortgages required them to pay only the interest on thier lons for the few years.If such borrowers are unable to refinance into lower-cost loans,many of them will face the propects of having to pay both interest and principle at higher,adjustable rates.
Let's me show you example for borrowers with a US$400,000 loan,such a jump could send their monthly payments to US$2,338 from US$1,417 that estimate the mortage payment .Im wondering how on earth the americans going to face this reality of future.
US economy not going to be looks bleak but the Confidence level with foreign fund manager is sinking day to day by removing out billion Fund out from US soil.
Only Obama policy looks much more brighter future for US to bring the confidence back in America compares to any John McCain policy.
Posted By: Jack999 @ 07/24/2008 2:20:24 AM
Comment: typo US$ '12 TRILLION' morrtage market.
Posted By: Jack999 @ 07/24/2008 2:13:32 AM
Comment: Us economic looks bleak ahead,this why americans must realise their American Dreams slipping away day by day since depression days.The troubles of mortgage finance giants are pushing up home loan rates to their higest levels in five years.While the us inflation is up since 17 years.the average interest rate.
The average rate for very big,so called 'Jumbo Loans' which cannot be sold to Fannie Mae and Freddie Mac was 7.8%,the highest since December 2000.
Loan rates are rising because of concerns in the financial markets about the future of Fannie Mac and Freddie Mac,which own the guarantee nearly half of the nation's US$12 billion mortgage markets to foreign bond investor.
The Washington can only try to stablise the Market by adding the cost is being passed on to comsumers via mortagage markets when,the the time US have the highest inflation ,unemployments,when personel income become flactuate.The rate hike is the greatest concern to home owners,whose mortgages required them to pay only the interest on thier lons for the few years.If such borrowers are unable to refinance into lower-cost loans,many of them will face the propects of having to pay both interest and principle at higher,adjustable rates.
Let's me show you example for borrowers with a US$400,000 loan,such a jump could send their monthly payments to US$2,338 from US$1,417 that estimate the mortage payment .Im wondering how on earth the americans going to face this reality of future.
US economy not going to be looks bleak but the Confidence level with foreign fund manager is sinking day to day by removing out billion Fund out from US soil.
Only Obama policy looks much more brighter future for US to bring the confidence back in America compares to any John McCain policy.