The Global Economy and Business

Nobody can predict how the house market can change nowadays as it has become so unpredictable. So that’s why the experts are doing their best to trace all the factors that can impact the house market in the US.

-    Affordability. So they try to find the places where the prices for living remain more or less stable for some period and attract buyers all the time. Among such places as Los Angeles, New York, San Francisco remain very popular, but the prices there are rather high.

-    The number of young buyers and the immigrants. The recent polls showed that the young Americans are very mobile and they easily change from state to state. Besides the immigrants from outside move to some particular regions like South Carolina, North Carolina. These states have experienced rather high purchases of property among the new residents.

-    Infrastructure i.e. the mixture of residential, retail, commercial facilities in one place. This makes the area more attractive for buyers.

-    Balance between the supply and the demand. In some cities the demand of houses available is higher than the supply and there are places where the situation is vice versa.

-    Job growth. In some cities new jobs are constantly created and the house market is quite developed. A lot of specialists are ready to invest some money and to buy a house.

All the factors are very essential while analyzing the house market situation in the country. But there are some other minor factors that can change the market upside down in a day.

Two large power companies have been fined for the sum exceeding billion euro : the Eurocommission has submitted an invoice to German power company E.ON and French GDF at a rate of 553 million euro each one. Both companies are contesting this decision.

The European competition authorities found out that in 1975 these companies agreed not to compete with each other in the national markets that is an infringement of the antimonopoly law of the European Union.

The competition commissioner of EU Neelie Kroes has explained: “the transaction of giants has struck first of all on consumers, we do not have other alternative than to impose high fines”.
This fine becomes the largest for all history of similar sanctions.

The Eurocommission has begun investigation above the German and French gas companies in 2007. They were accused of agreement about division national gas markets when they jointly built a pipeline to import Russian gas: in particular that E.ON will not sell gas in France, and GDF – in Germany. This is an infringement of the law of EU about fair competition.

The European Central Bank has started the emission with the purpose of repayment of eurobonds for a total sum of 60 billion euro and became the fifth large Central Bank, which resorted to this measure. Before this way of economy support was selected by the Fed of the USA, national banks of Japan, England and the Swiss Central Bank. Thus, the European regulator has reconsidered the former rigid monetary position according to which inflation was considered the main enemy of the eurozone.
The repayment of eurobonds for a total sum of 60 billion euro has been announced by the chairman of ECB Jean-Claude Trishe. The fact that the started emission of euro is uncovered does not cause doubts as total gross national product of the European Union falls. According to forecasts, by the end of the current year it will be reduced almost on 2 %.

Experts also mark, that the declared issue with the purpose of the repayment of Eurobonds is a step which is necessary first of all to reassure investors.

« Now such monetary policy is perceived as necessity, — explains the deputy chief of analytical management of ” Renaissance-capital ” company Alexey Moiseyev..-sixty billions for the European economy which is more, than American, is, certainly, anything. The emission should be 10 or 20 times more to play any role. ». Let’s note, that Fed of the USA from the beginning of the year has printed more than billion dollars.

However, such policy still has opponents on both sides. « Recently the head of the European Central Bank mister Trishe has declared, that there are no opportunities for the weakening of monetary policy. But only the statement and the practical actions of ECB differ, — comments the head of the department of research of Forecast Australia — So here we deal with the certain divergences between word and business. Within the nearest year the European Central Bank is going to print and throw out on the market 350 billion euro or even more. It is easy to understand, that such things can badly affect the trust to euro ».

And still it’s too early to confirm, that ECB has completely handed over its positions, in fact its base rate continues to remain the highest among the developed economy — 1 %.

Leaders of the G8 reached some agreements on climate, international security and the global economy.

Gary Samore, the White House point man, has noticed that the basic area of disagreement is that the U.S. push for a missile defense system in Poland and the Czech Republic.

Russia considers that this is a direct challenge to its own defense.

Obama’s speech:
“I know Russia opposes the planned configuration for missile defense in Europe. And my administration is reviewing these plans to enhance the security of America, Europe and the world. And I’ve made it clear that this system is directed at preventing a potential attack from Iran. It has nothing to do with Russia. In fact, I want to work together with Russia on a missile defense architecture that makes us all safer. But if the threat from Iran’s nuclear and ballistic missile programs is eliminated, the driving force for missile defense in Europe will be eliminated, and that is in our mutual interest”.

Russian politicians think U.S. officials are lying saying that planned missile shield installations in Eastern Europe are meant to defend against possible Iranian attack. Russia considers that a direct challenge to its own defense. Obama has so far stayed noncommittal; here, he hints at using the planned bases as a bargaining chip. If you don’t want radar and interceptors near your border, Obama tells the Russians, you’d better get a lot more helpful with Iran.

Obama is reproaching Moscow on several points: for its war last year with Georgia; for insisting that Georgia’s breakaway republics, South Ossetia and Abkhazia, are independent nations; and for interfering in Ukrainian politics. Moscow dismisses the American criticism. The response is the following: Where was your interest in state sovereignty when you recognized the independence of Kosovo from Serbia last year? And how can you tell us about secure borders after invading Iraq and Afghanistan, and while you are still occupying those lands? Moscow argues that the United States is pursuing its own goals in Ukraine and Georgia, trying to break down the two countries’ historical ties to Moscow in order to undermine and contain Russian power.

In spite of the fact that many questions remained opened, the contract between Russia And the USA has given something to both sides.

On 7th of July President Obama and Russian President Dmitry Medvedev agreed to reduce their nations’ nuclear arsenals. According to the new contract, the maximum number of warheads will be reduced to 1 500 - 1 675 for each party, and also new pact would set a limit of between 500 and 1,100 devices that can deliver the warheads, while earlier this number was 1,600. But the Russians have only about 800 delivery systems.

Today analysts of the various countries recognize China as the candidate on capture of world leadership in the post crisis world. China - unique from large powers with rather stable economic growth. It is expected, that gross national product of China will increase by 8 % in 2009.

The country successfully realizes an anti-recessionary package (16 % from gross national product within two years), stimulating internal demand. And this package is already recognized as one of the best and effective in the world. Industrial production grows in China the fourth month. Value of an index of managers of purchases has grown to 53,2 points in June with 53,1 in May (above 50 - growth). Volume of export orders has grown In June in comparison with May.

China is the largest investor of the USA market of state papers. China continues interventions to the market of the American state papers, despite doubts concerning stability of the USA economy. It does not have other choice, except to continue massed injections to the American economy through purchase of state papers because in the conditions of world crisis it is the unique large market with sufficient liquidity which corresponds to scope of the Chinese investments. About a quarter of an external state debt of the USA belongs to China, according to the American Ministry of Finance.

The exact structure of state investments of China is the state secret, however, by estimations of different sources, the share of dollar actives in them makes an order of 70 % at total amount $1,953 bln.

China has got stuck in “a dollar trap”, mark both western and Chinese analysts. The current policy of the American authorities can lead to a collapse of dollar and world inflation. One of the basic fears of the Chinese authorities is called by attempts of the USA to overcome a present economic crisis by means of flooding economy with money that can lead to inflation and reduction of cost of the American actives that will extremely negatively be reflected at economy of China. On the one hand, China is not interested in dollar crisis, therefore continues injections in economy of the USA, on the other - the authorities of China are interested in stability of the USA economy more and more. In this connection China has once again brought up a question about creation of new international reserve currency. Many analysts consider, that recent falling of dollar is connected with this.

“It is necessary to create new reserve currency, which will not be adhered to economy of its emitter to prevent lacks of such currency”, - is spoken in the economy review for 2008, let out by National bank of the Peoples Republic of China. The head of the Central Bank of China Chjou Siaochuan has suggested the world states to create new reserve currency and to expand powers of the International currency fund (IMF) in this sphere. “The special rights of loan” of IMF or gold can play the role of international currency.

However, a number of experts underlines, that in immediate prospects dollar has nothing to be afraid. There are more sceptically adjusted experts concerning dollar, but also they recognize, that the importance of dollar cannot be changed for one day. “We can see additional reserve currencies” though this event “is not going to occur this night” the professor of economy of New York university Nuriel Rubini has noted.

Nobody can deny that the world economic system greatly depends on the trends of the US economy. Most economists agree that the financial crisis was caused by the wrong activities of the US financial institutions and US government policy.
So, today it seems that the whole world studies the situation in the US economy trying to find some fact of the recovery. People believe that the same interdependence will take place and the growth of the American market will result in the growth of the international trade , European consumer market and the whole world market.
In this situation the statements of the U.S. Federal Reserve Chairman Ben Bernanke are considered very positive. In particular he said that the recession in the USA was becoming slower and the US government expected to see the first sights of growth somewhere in October-November of this year. He also assured that the government fiscal and monetary policy would continue to stimulate the decreasing of the recession trends.
As for me I’m not a prophet to predict the future but it’s absolutely clear that all that statements are so-called “good news” and for sure they will have a positive impact on the economic trends. I really hope that this would be enough at least to decrease the recession.

One of the leading economic web-analysts - woodwardhall.wordpress.com - has made some interesting and unpleasant at the same time calculations. He has compared the contemporary crisis with the Great Depression in the terms of the biggest economic problem concerning people. Yes, I’m talking about unemployment!

For sure, theoretical economists can ague that statistics differs (now and in 1929). Also they can mention that the accuracy of the numbers in the beginning of the XXth century was lower than we have today. But the main thing regarding unemployment that is completely the same in 1929 and in 2009 says that people have suffered that times and they suffer today as they loose their jobs and their beliefs.

So, returning to numbers I want to show the graph from the mentioned above blog. It shows that the unemployment in March 2009 was the highest “negative tend” since the Great depression. Look yourselves:

I think that one of the main reason for the financial crisis is not the real estate market. I strongly believe that falling of the purchasing power of US dollar started much earlier.

Just think over the following. The USA “print” (issue) dollars as there is a huge demand for them/ Why? Because it plays the role of world money. And this is true not only for a traditional economy but for a black (shadow) market too.

But as electronic money develops they start substituting real American dollars on the currency market. BUT FED continued printing and printing. So, the day came and dollar started to loose it’s purchasing power! Such easy!

Just imagine an American ship drifting in Pacific ocean, carrying Chinese goods to Russia, having German passengers and Argentinean personnel, using the Japanese  service to navigate. At first glance at this astonishing cooperation you might be deeply impressed, and so was I, having heard a lot about international economy and a persistent tendency to open all markets and liberalize national economies. A wonderful marketing campaign is undertaken to convince everyone that global market is a cornerstone of successful economic development and sustainable growth. The main ‘promoter’ of this idea are TV channels.

Just count how many times per day you hear about prospects that European Union will definitely have in case of enlargement of its borders, and about endless mergers and buyouts that European Countries rush to commit with foreign investments, and all that talks about the importance of direct and indirect foreign investments, that are essential to national business!!! All these efforts are aimed at earning more and more, making major market players richer. Unfortunately one important truth is not considered here, that ‘grows for grows is the ideology of cancer cell’:) I do assure you that these biased news are detrimental to your clear understanding of the problems that this ‘United International’ economy might face. Please, do not forget about dozens of negative aspects to which this ‘collaboration’ will lead: the internationalization of business creates a dangerous situation on financial markets: on international stock exchanges prices on stocks and bonds are fluctuating widely due to certain circumstances, and that has a negative impact on prices of derivatives: futures, options, swaps and forward contracts, that are traded on markets all over the world. The results are disappointing: one failure in one country can be transformed in global crises.

But lets draw our attention to some other issues, that  have social importance in world economy, thus turn to the point of level of life and safety, bearing in mind cultural diversity of particular nations.

Look here: even if I’m a citizen of  Belarus, that doesn’t mean that in few years I will have so many differences if compared with European or American youth, and my country will not be exposed to opportunities and threats that world economy has. And what about standards? I don’t want to speak the language, that is native to more than 6 billion people in our planet, as I don’t see any advantages in common ‘global’ lifestyle, tastes, fashion, etc. Anyway this is also a foreseeable consequence of  further development of  world integration.

Why have I written this? May be I’ve done it to psychologically prepare myself to the fact that the process of globalization is inevitable and unstoppable, but nevertheless should be a subject to constructive critique…

Partnering with another business can be complex. It takes time and effort to build the right relationship. Problems are likely to arise if:

 

the objectives of the venture are not 100 per cent clear and communicated to everyone involved;

there is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners;

different cultures and management styles result in poor integration and co-operation;

the partners don’t provide sufficient leadership and support in the early stages.

 

Success in a joint venture depends on thorough research and analysis of aims and objectives. This should be followed up with effective communication of the business plan to everyone involved.