Financial Globalization (Pratik Negi)


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Financial Globalization (Pratik Negi)

  1. 1. Financial Globalization has brought speculation and ruin<br />AakashGoswami<br />Jigar Joshi<br />Nidhi Joshi<br />PratikNegi<br />
  2. 2. Financial Globalization<br />PratikNegi- Overview of financial globalization and The big question<br />
  3. 3. What is Globalization?<br />Combination of economic, technological, Socioculturaland political forces<br />Internationalism<br />Integration of national economy into international economy through:<br /><ul><li>Trade
  4. 4. FDI
  5. 5. Migration
  6. 6. Spread of technology</li></li></ul><li>Roman and British Empire’s contribution<br />
  7. 7. What is Financial Globalization?<br />The liberalization of trade in financial assets.<br />It is the flow of capital and corporate investments between various countries.<br />World allocation of money leading to exchange of services and goods.<br />
  8. 8. Financial Crisis<br />Stage 1: Severe fiscal imbalances<br />Stage 2: Run up to the currency crisis<br />Stage 3: Currency crisis<br />Final stage: currency crisis triggers a full-fledged financial crisis<br />
  9. 9. The big question is:<br />Then why the financial globalization has failed in the major parts of the globe?<br />
  10. 10. Financial Globalization<br />Nidhi Joshi- the ladder to speculation and ruin<br />
  11. 11. 1st step-First mover advantages<br />Asymmetric trade and investment<br />Exploitation on customers by means of increasing profits<br />Also increases competition among the domestic service providers<br />
  12. 12. 2nd step-Expropriation, unfair prices<br />Ruins the common man<br />Political risk involved with investment<br />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<br />
  13. 13. 3rd step-Economic and political interests of investor countries<br />Disproportionate shock on the local economy if the foreign investor withdraw his money<br />Debt and exploitation<br />Corrupts the political system of the country<br />
  14. 14. 4th-Undervaluation of currency of poor countries<br />Mismatch between the national policy and the economy of the domestic country<br />Slow growth in the development of the country<br />Banking panics or Recession<br />Cheaper exports<br />
  15. 15. Financial Globalization<br />Jigar Joshi- Contemporary Examples<br />
  16. 16. Mexico Crisis, 1988<br />Happened due to 1970s increase in petroleum prices<br />Lax banking and corrupt practices<br />Failure in maintaining fixed exchange rate<br />Devaluation was not handled correctly<br />Mexico lost its image in terms of exporting its crude oil<br />
  17. 17. Indonesian crisis, 1997<br />Occurred due to improper free-floating exchange rate arrangement<br />Falling of the rupiah in international market<br />
  18. 18. Argentina crisis,<br />Unable to pay the debt of loan in 1983 due to tumbling economy<br />Rise in inflation<br />Unemployment<br />Foreign companies moves out<br />Problem in debt restructuring<br />
  19. 19. Evolution of Argentine Gross National Product<br />
  20. 20. Thailand crisis, 1997<br />Failure to devalue baht<br />Bankruptcy law was enforced<br />Problem with devaluation<br />Its international trade became worse<br />
  21. 21. Malaysian crisis, 1997<br />Due to the devaluation of Thai baht, Malaysian ringgit was ‘attacked’ by speculators<br />Downgrades on the stock and currency markets<br />The ringgit fall to almost 50%<br />The exit of new plans for its development<br />The first recession in the country<br />Unemployment <br />
  22. 22. Japanese crisis<br />As foreign companies entered the market, the value and the price of the local goods fall<br />This resulted in to low consumption rate<br />Estate bubble<br />The prices of housing in Japan are still high<br />
  23. 23. Total debts<br />
  24. 24. Financial Globalization<br />AakashGoswami – Conclusion and Recommendations<br />
  25. 25. Financial globalization ‘dangerous’ success-<br />Bubble-effect<br />Foreign Competition and thus rivalry<br />Brain drains<br />The shift of outsourcing<br />The investor on his wishes withdraws and then redeploys<br />Chances are given more to foreign companies. What about the domestic talent?<br />
  26. 26. And the success is still rising…<br />What about the national identification?<br />Shifting production to low-wage economies and thus we jump into the ‘race to bottom’<br />Due to language barriers, time also increases in solving an issue<br />Fear of debt<br />
  27. 27. Recommendations<br />Looking at Argentina’s example, need of developing strong policies<br />Putting a cap on financial globalization<br />Not giving all powers to the international investor<br />The living of middle class and poor class should be improved<br />Keep view on inflation and not relate it with other countries.<br />