The Global Economic Crisis Essays
Many researchers have pointed out that the global imbalances …show more content…
Rising demands from China (and, to some extent, India), plus a booming world economy saw commodity prices rise across oil, minerals and food from late 2004 to late 2007. The shock to the global economy from this commodity price boom was as big as the first oil shock in the 1970s. (qtd. in McKibbin and Stoeckel 5).
As a consequence, the global imbalances contribute in some potential shocks and structural changes of world’s economy system, because the direction of flows has many affects to the associated exchange-rates and the interest rate behaviors. For example, “the United States on net supplies financial assets and the emerging market countries demand them” (Ferguson et al. 24). Fast growing countries with inability in creating sufficient financial instruments become dependent on the saving instruments from developed country such as America. This was showed as a potential risk in the 1997-8 Asian economic crisis that the crisis contributed to the United States account deficit, reduced the global real interest rates, and boosted the America’s share of assets in global portfolios. The U.S.