external shocks to the global economy
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External Shocks to the Global Economy

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External Shocks to the Global Economy. External Shocks to the Global Economy. Energy Costs. Energy Costs. Rising oil prices affect many businesses worldwide Change the nature of demand (e.g. off-road vehicles) Potential to generate inflationary pressures

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energy costs1
Energy Costs
  • Rising oil prices affect many businesses worldwide
  • Change the nature of demand (e.g. off-road vehicles)
  • Potential to generate inflationary pressures
  • Possibility of triggering global economic slowdown
energy costs2
Energy costs
  • How does rising energy costs effect us?
  • How does effect you, the student?
  • Succession of poor harvests can lead to famine conditions
  • Attempts to grow food to meet increasing shortages can lead to environmental degradation
  • Impact on global economy of dealing with aid problems and the social issues that come with it – refugees, for example
  • Lack of access to world markets by developing countries
share prices1
Share Prices
  • Share Prices reflect the expectation of future financial performance
  • A belief that prices may fall in any area of the world is sufficient to trigger global market changes
  • The share market is now 24-7
share prices2
Share Prices
  • What products are effected by this trend? The answer is probably in your pocket.
economic policies1
Economic Policies
  • Interest rate changes anticipated across the world
  • The global capital market means such changes can have significant impacts
  • Ben Bernanke, and previously Allen Greenspan – Chairman of the Federal Reserve – seen as being one of the most powerful figures in the world because of the influence he has on US economic policy
  • Expansionary policies in major economies can influence smaller economies around the world
interest rates
Interest Rates
  • Do the math?
  • If you buy a home for $200,000 with an interest rate of 4%, what are the payments per month over 360 months?
  • If you buy a $20,000 car, with an interest rate of 10%, what are that payments per month over 60 months?
domestic policies
Domestic Policies
  • Trade Protectionism – for example, the US tariff on steel
  • Regulation – impacts on trade patterns
  • Trade Blocs – NAFTA, EU
  • One of the most significant of the factors affecting the global economy
  • Business does not like uncertainty!
  • Affects future planning and investment
  • Can include:
    • Corruption/fraud – Parmalat, Enron – causes loss of faith in markets
    • Political change – Iraq, Zimbabwe, South Africa, China
    • Rumors about potential problems
    • Payment default – Russian Bond Crisis
    • Collapse of major industries – shipbuilding, coal, manufacturing, etc.
  • War increases uncertainty and leads to potential economic dislocation
  • The Middle East and conflict in Africa being two such cases. Darfur and the bombing of pipelines in Nigeria.
natural disasters1
Natural Disasters
  • 1906 – earthquake in San Francisco – the city lives in the shadow of another quake, which will happen sometime – what will be the global effect?
natural disasters2
Natural Disasters
  • Natural disasters can affect resource allocation and availability and also create massive economic dislocation
  • Temperature extremes can destroy crops and lead to global shortage