Case Analysis Global Economy - Recent World Economy Dynamics

Recent World Economy Dynamics

The global economic crisis is far from over, but there are some promising signs on the horizon, as well as some bleak outlooks. Globalization is a great asset of the world, but if this economic downturn has showed us just how vulnerable, we are to each other. The world's economy and trade are being compromised during these "tough times". While advanced economies are still suffering from the recession (US, EU countries) many emerging market economies (EMEs) are showing quite promising trends. Different countries' varying monetary policies can adversely their fragile economies, thus effect the global economy. Areas such as interest rates, stimulus plans, and overall country demand decide how an economy of scale will perform.

For instance emerging market economies such as Asia and Latin America are performing well with the fact that they lack much of the financial excess (debt) of the U.S. and they offer products that are in a higher demand than U.S. products ("Mondaq.com" 1-6). EME's are also benefiting from all the inflow of capital from advanced countries, which pressure the EME's into inflation of their economies ("Mondaq.com" 1-6). While as we (United States) rely on many EME's for our products (China) it creates not only trade imbalances, but it leads EME's currency to be undervalued in comparison to the U.S. dollar, which is doing their economies' good, but hurting the world's.

In the United States forefront, this country seems to be slowly recovering from the recession. Troubling signs included: housing market still falling, household consumption fell, and the need for imports increased ("Mondaq.com" 1-6). In effort to keep inflation down the Federal Reserve is trying to keep the interest rates near zero percent. Advanced economies are considered to be "highly accommodating" in these crisis, even though there is little room for an economic stimulus; a source of concern in the world economy ("Mondaq.com" 1-6).

Sustainability is an overall economic concern where in the article it states that natural offsets such as monetary policies are less likely to be as beneficial in the past. Imbalances will continue to be noticeable and could possible grow; due to things such as slow restructuring of demand, etc. ("Mondaq.com" 1-6). Next potential outputs will continue to be slow in countries like the U.S., due to lack of