Financial Globalization (Pratik Negi)
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Financial Globalization (Pratik Negi)

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Financial Globalization (Pratik Negi) Financial Globalization (Pratik Negi) Presentation Transcript

  • Financial Globalization has brought speculation and ruin
    AakashGoswami
    Jigar Joshi
    Nidhi Joshi
    PratikNegi
  • Financial Globalization
    PratikNegi- Overview of financial globalization and The big question
  • What is Globalization?
    Combination of economic, technological, Socioculturaland political forces
    Internationalism
    Integration of national economy into international economy through:
    • Trade
    • FDI
    • Migration
    • Spread of technology
  • Roman and British Empire’s contribution
  • What is Financial Globalization?
    The liberalization of trade in financial assets.
    It is the flow of capital and corporate investments between various countries.
    World allocation of money leading to exchange of services and goods.
  • Financial Crisis
    Stage 1: Severe fiscal imbalances
    Stage 2: Run up to the currency crisis
    Stage 3: Currency crisis
    Final stage: currency crisis triggers a full-fledged financial crisis
  • The big question is:
    Then why the financial globalization has failed in the major parts of the globe?
  • Financial Globalization
    Nidhi Joshi- the ladder to speculation and ruin
  • 1st step-First mover advantages
    Asymmetric trade and investment
    Exploitation on customers by means of increasing profits
    Also increases competition among the domestic service providers
  • 2nd step-Expropriation, unfair prices
    Ruins the common man
    Political risk involved with investment
    The prices set by the multinational companies is not set looking at the development index of the country but just from profit-making point of view
  • 3rd step-Economic and political interests of investor countries
    Disproportionate shock on the local economy if the foreign investor withdraw his money
    Debt and exploitation
    Corrupts the political system of the country
  • 4th-Undervaluation of currency of poor countries
    Mismatch between the national policy and the economy of the domestic country
    Slow growth in the development of the country
    Banking panics or Recession
    Cheaper exports
  • Financial Globalization
    Jigar Joshi- Contemporary Examples
  • Mexico Crisis, 1988
    Happened due to 1970s increase in petroleum prices
    Lax banking and corrupt practices
    Failure in maintaining fixed exchange rate
    Devaluation was not handled correctly
    Mexico lost its image in terms of exporting its crude oil
  • Indonesian crisis, 1997
    Occurred due to improper free-floating exchange rate arrangement
    Falling of the rupiah in international market
  • Argentina crisis,
    Unable to pay the debt of loan in 1983 due to tumbling economy
    Rise in inflation
    Unemployment
    Foreign companies moves out
    Problem in debt restructuring
  • Evolution of Argentine Gross National Product
  • Thailand crisis, 1997
    Failure to devalue baht
    Bankruptcy law was enforced
    Problem with devaluation
    Its international trade became worse
  • Malaysian crisis, 1997
    Due to the devaluation of Thai baht, Malaysian ringgit was ‘attacked’ by speculators
    Downgrades on the stock and currency markets
    The ringgit fall to almost 50%
    The exit of new plans for its development
    The first recession in the country
    Unemployment
  • Japanese crisis
    As foreign companies entered the market, the value and the price of the local goods fall
    This resulted in to low consumption rate
    Estate bubble
    The prices of housing in Japan are still high
  • Total debts
  • Financial Globalization
    AakashGoswami – Conclusion and Recommendations
  • Financial globalization ‘dangerous’ success-
    Bubble-effect
    Foreign Competition and thus rivalry
    Brain drains
    The shift of outsourcing
    The investor on his wishes withdraws and then redeploys
    Chances are given more to foreign companies. What about the domestic talent?
  • And the success is still rising…
    What about the national identification?
    Shifting production to low-wage economies and thus we jump into the ‘race to bottom’
    Due to language barriers, time also increases in solving an issue
    Fear of debt
  • Recommendations
    Looking at Argentina’s example, need of developing strong policies
    Putting a cap on financial globalization
    Not giving all powers to the international investor
    The living of middle class and poor class should be improved
    Keep view on inflation and not relate it with other countries.