A Bird Eye View

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Eco 164
ppp 1

• A Bird Eye View
• of the Current World Economy
• Trade and Finance
• J.D. Han
• Kings University College
• at UWO

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1. Current Fundamentals of World Economy
(U.S.)
(Asia, etc.)
Growth
Lack of Investment
Managed FOREX
Consumption Rises Savings lags
Government Budget Deficits rises
Export Promotions
Savings Glut
9.11
Current Account Surplus
Current Account Deficits
(offsetting)
External Liability Position Imbalance
Current Account Imbalance
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2. Flows of Goods

• U.S. is a voracious absorber of world products
  particularly from the East Asia
• U.S. Trade Decifits (Import in excess of Exports)
  has been the largest and increasing rapidly while
  the East Asian countries have been accumulating
  Trade Surplus with U.S.
• - International Currencies(monies) flow to the
  East Asia
• The East Asia is becoming the Factory of the
  World

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World Current Account Trends of Major Countries
(100 Million )
Note 1) China, Taiwan, Korea, Singapore,
Malaysia, Thailand, and Indonesia Data IFS,
Bloomberg
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World Current Account Deficits
(100 million U.S. )
Note 1) ( ) has the share in the
world Sources IFS, Bloomberg
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World Current Account Surplus
(100 million , )
Note 1) ( )has the share in the world Data
IFS, Bloomberg
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Current Account Trends of U.S.
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U.S. Trade Deficits with
(100 mil. , )
Note 1) minus (-) indicates the U.S.s surplus
Data U.S. Government
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Savings, Investment and Trade U.S. and Major
Partners

• Blue- Saving
• Red Investment
• Yellow Current Account
• Data from IMF

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3. Flows of Capital

• International Liquidity does not stay invested
  in the East Asia -Monies are flowing back to U.S.
  
• This fuels U.S. imports from Asia
• This gluts U.S. financial market, pushing Stock
  Prices up and Interest Rates down

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External Liabilities (Debts) Trends
(billion dollar)
Data IFS
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U.S. Net External Liabilities (Debts) Credit
from the rest of the World
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Who are buying U.S. Bonds?
(100 mi. )
Data U.S. Government Documents
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4. FOREX

• International Capital Flows accompany the
  imbalance of Merchandise Flows (in the opposite
  direction)
• Capital Flows (of Currencies) destabilize
  Relative Prices of Currencies or FOREX rates

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U.S. Current Accounts and Currency Value FOREX
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Recap. Current Fundamentals of World Economy
(U.S.)
(Asia, etc.)
Growth
Lack of Investment
Managed FOREX
Consumption Rises Savings lags
Government Budget Deficits rises
Export Promotions
Savings Glut
9.11
Current Account Surplus
Current Account Deficits
(offsetting)
External Liability Position Imbalance
Current Account Imbalance