Seminar in International Finance

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Brainstorming

Published by cgray4gv January 25th, 2009 cgray4gv in Uncategorized. 0 Comments

I personally know very little about the current economic crisis. I have seen the stock market go down and I have seen seen employers cut down on the number of employees. But I do not know the economic causes behind these issues. So the first thing I think we should do is to look at the problems and causes just in the United States. Once we figure out those issues I think we would have a much better basis and idea for figuring out how our economic problems have spread to other countries. The United States is a very active participant in the global economy so it is without a doubt that this crisis has affected other countries, but the question is how much and to what extent.

I would like to just get a better understanding about the whole crisis. Learn from my peers and get a perspective on what is happening and what will happen in the coming months.

Brainstorm

Published by erinodonnell January 25th, 2009 erinodonnell in Uncategorized. 0 Comments

I think the most important thing to learn about this crisis is how it will directly affect us and how we, as students and young professionals, can adjust to and alleviate the effects of this crisis. The situation is so far reaching that obviously nearly all aspects of our lives have been at least marginally affected, but I don’t know if we understand what international implications have and may continue to occur. I know that for me, the field of accounting is still considered a strong position with relatively high hiring levels, but there have been many changes in recent years. Since 2002, FASB has been working to converge American and International accounting standards in order to provide better comparability between multinational companies. In 2008, the SEC announced that all companies would be reporting under IFRS by 2014; this is contrast to FASB’s original plan to simply reduce differences between US GAAP and IFRS. In the age of globalization the use of completely different standards among countries and companies which to business on a daily basis seems inefficient and ineffective. International markets will run more smoothly if all the operators can understand and effectively analyze each other’s financial statements and reports. It would be interesting to see what steps countries take to increase comparability and to differentiate themselves in order to promote their own economies. This crisis could have the effect of countries becoming more open to achieving one global economy or pulling back in order to be more self-sufficient and avoid dependence on unstable markets. How will companies react in order to better predict financial instability within certain markets and prevent future financial collapses? Will using the crisis as a catalyst for change bring about improvements, or will these changes prove ineffective and pointless in aiding future financial circumstances?

Brainstorming International Finance Crisis

Published by cmurray31708 January 24th, 2009 cmurray31708 in Uncategorized. 0 Comments

I think that there are several important questions that need to be answered in order to go about solving (or at least attempting to find a solution) to the current financial crisis. After reading Krugman’s book, I think it is important to find out what the origins of the current crisis are by looking at past crises. The crises Krugman highlights seem to be affecting us (the USA/the World) in some form or another. What started the current crisis? When did it start? What got the “ball” rolling in the wrong direction? What exactly is the shadow market? I have been also reading the George Soros book called “A New Paradigm for International Markets” which, although I have not finished, has shown me new perspective on the situation. In his book, Soros perpetuates his Theory of Reflexivity. Without delving into details, he says that humans are incapable of attaining perfect knowledge because they are a part of the system in which they are trying to understand. This is significant because Economics attempts to solve problems in the way that natural sciences do by testing objective statements using empirical data and trying to use theories based on perfect knowledge until they are falsified. However, in the natural sciences there is a separation between participants views and the actual course of events. In the world of financial markets, there is so much influence on what people feel, or speculate, that it is impossible to separate participants from the course of events that they are participating in. This introduces a high level of uncertainty if the IV and DV variables cannot be controlled from an outside observer like in natural sciences and that is why economics based on perfect knowledge and the idea that markets tend toward equilibrium and deviations from it are random, is INCORRECT, according to Soros. How this relates to my brainstorming is this: Are their patterns of human behavior that influence financial markets and how so? If economics is based on perfect knowledge, but perfect knowledge is unattainable, then do we question the validity of our knowledge about how international markets work? If our knowledge was correct, wouldn’t we have been able to avoid this crisis? Why did governments not take more steps ahead of time to correct the crisis? Or is they did, why didn’t it work? Also, how does this crisis effect the individual? Employment, income, spending, credit, bills, etc… On another note, how does the crises affect developing countries? If there really is a core-periphery relationship between developed and underdeveloped countries, then wouldn’t this financial crisis rock the socks off Third World countries? How do we avoid crisis like these in the future?

Brainstorming ideas

Published by mwarlick January 24th, 2009 mwarlick in Uncategorized. 0 Comments

I think that the financial crisis and subsequent recession is definitely having a negative impact on economies around the world. Countries around the world are trying to figure out how to get themselves out of this mess, that in my opinion, was created by greed. One thing positive is that after all of this is over, hopefully lessons will be learned from it and there will be tighter standards to prevent something like this from happening again in the near future. I don’t know if the financial crisis actually started in the U.S. or not, but I think that a lot of foreign investors throughout the world might not be so quick to jump into investing in U.S. companies after seeing what has happened over the past year. Of course its not just the U.S. banks and companies struggling right now, its happening in different countries around the world. I think that part of the international problem might be that some other countries attempt to imitate the U.S. in certain economical aspects, and when the U.S.’s economy is struggling, others may as well. Also, there are other countries that peg their currency to the U.S. dollar. The dollar’s fluctuation due to bubbles or recessions, or interest rates, or changes in the money supply might affect other currencies as well. Politics have definitely been affected too, because any party that was in power or is currently in power during this crisis, is likely to not be re-elected. We saw this in the U.S. with Obama handily defeating McCain. I’m not saying that McCain would have won if our economy was booming at the time, but a lot of people just wanted to vote a different party into power that would hopefully offer some new ideas and solutions. What is happening in the short-run is that the U.S., and probably many other developed countries around the world, are cutting interest rates to almost zero in order to get people and businesses to start borrowing and spending again, there has been and will be a whole lot of money pumped into the economy from the government plans, and people are getting help from the government to stay in their houses by making deals with the mortgage companies because of government mortgage bailout money and large failing companies are getting rescued by the government. I think that all of this and other stuff that has been occurring will lead us to a pretty high economic boom within the next 3 or 4 years and it will also end up leading to inflation which the Fed will have to control by raising interest rates back up quite a bit. As far as international goes, I think that in the short-run, other countries might not view the U.S. as being a totally safe place to invest their money, but in the long-run, the U.S. will once again prove that it can overcome any economic crisis that comes its way, and it is my understanding that even as bad as U.S. stocks have been doing over the past year, a lot of other countries have been doing much worse, so I guess that looks good. I hope at least some of what I wrote makes sense. This was definitely just me typing up my thoughts. Anyways, I would like to have the question focus on international investing during the crisis and predicting how it will be affected after the crisis. I think that it will be interesting to see how foreign investors have been reacting to the crisis, and how U.S. investors have reacted as far as there international investing strategies. Are people actually investing more in the U.S. now since the stock market is hopefully at or close to its bottom, or are investors scared of the U.S. right now? I will post more after doing more reading on the subject matter.

Brainstorming Assignment

Published by arhoades January 23rd, 2009 arhoades in Uncategorized. 0 Comments

I think to start answering the research question we first have to know how the economic downturn began. Even before that we need to understand the different players in the game, from countries to governments to individuals. What choices did countries around the world make that left them more or less vulnerable to the current economic downturn? A comparison of the relative openness and connectivity of different countries to international markets before and during the crisis would likely help us understand some of the global economic effects of the financial crisis. How had the government regulated international finance in the past? Was it becoming more or less open to it? How much money did investors have in international markets – or how much confidence did investors have in international investments?

After the crisis we need to know what the macroeconomic shocks were in countries affected by the crisis. Which countries had investment firms and banks that were significantly involved in and affected by the financial crisis? How did the government respond to the economic shocks? Did what the government’s action help – or not – and how much or how quickly? More interesting perhaps is what citizens of different countries think of the financial crisis? Did they blame another country? Big money? Investment firms? Their own government? How this financial crisis will change the perceptions of people around the world, I think, should be an important part of our research (although it may be too soon to tell). While the economy may get on its feet again people’s perceptions and confidence towards international finance may have changed in ways that will affect governments and investments for a while to come.

It is how this financial crisis has changed paradigms around the world that most interests me, and what choices might be associated with these new perspectives in the choices of future governments and investments.

“unedited” and “unfocused” Brainstorming

Published by dhydo0eg January 23rd, 2009 dhydo0eg in Uncategorized. 0 Comments

Well, first we must figure out exactly WHAT the current US Financial crisis is, before we can determine any global implications from it. Also, there may be several implications within different fields of study; so are we only sticking within the field of Finance? or Economics? But what exactly lies within the field of Finance? Lastly, are we only looking at the effects of what has already happened or will we also be looking at how new changes could curb or reverse the current recession/crisis?

Basically, I understand that we need to narrow down this broad question and that the way you want to do that is to let us choose. Honestly, I’d rather let you lead… but since thats not an option; personally, I’m interested in how other countries have adjusted or will adjust their lending and borrowing with good ‘ol Uncle Sam. Rather simple, I know, but to the point.

Brainstorm..

Published by srestaino January 23rd, 2009 srestaino in Uncategorized. 3 Comments

One of the main things I’m not entirely sure of is just how interconnected the global market system is. We all know that there’s such thing as an international market system where countries interact and utilize each others resources like labor and buy and sell to each other. But to what degree are the economies of the major international actors dependent or relying on imports and exports? Does that make sense? I think starting by trying to understand any sort of dependence that various countries have on a global economy is a good way to understand and measure just how much of an impact their market systems would have should something go awry in a country (such as the US) that they depend on. For example, I think Iceland’s economy sunk pretty far last fall as our crisis really picked up steam, whereas Korea is just now experiencing an economic slowdown. This is just one of the things I’m interested in.

Also, there was an interesting paper we read in Hansen’s Am. Econ History class last fall about the Great Depression. The author argues about how/why it began in the U.S. and whether or not the U.S. could be blamed for the Global Depression that began. http://www.jstor.org/stable/pdfplus/2138…

Another thing, I’m a person of lists and organization. So, what are our major industries that are over 50% dependent on foreign resources (ex: land, labor) and how do these industries contribute to our domestic economy? Also, visa versa, how much of an impact do our dependent industries have on the foreign economies they heavily interact with?

Brainstorming about the Research Question

Published by sgreenla January 16th, 2009 sgreenla in Uncategorized. 1 Comment

While I am gone next week, I’d like you to try to brainstorm about the research question which is the focus of this course: Namely, what are the global implications of the current US financial crisis/recession

· What are the things we need to figure out to answer this (broad) question?

· What questions do we need to explore?

· What parts of this broad question are you interested in?

When you are done brainstorming, post your thoughts on the course blog by Friday, January 23. Don’t look at what anyone else writes until you’re done posting.

Remaining “Book Review” Books

Published by sgreenla January 13th, 2009 sgreenla in Uncategorized. 0 Comments

The following books have already been ‘claimed’ for the “Book Review”:

Kevin Philips, Bad Money, Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (Jackie Evans)

Charles Morris, The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash (Michael Warlick)

George Soros, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means (Charles Murray)

George Cooper, The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy (Joe Mundy)

Martin Wolf, Fixing Global Finance (Margaret Graybeal)

Michael Lewis, Panic: The Story of Modern Financial Insanity (Sarah Restaino)

Barry Ritholz: Bailout Nation: How Easy Money Corrupted Wall Street and Shook the World (Erin Beddingfield)

Dean Baker, Plunder and Blunder: The Rise and Fall of the Bubble Economy (Sierra Stoney)

Niall Ferguson, The Ascent of Money (Ann Spillman)

John Bellamy Foster, The Great Financial Crisis: Causes and Consequences (Kendall Jones)

Robert Shiller, The Subprime Solution: How Today’s Global Crisis Happened (David Hydorn)

You could also choose some other book that I approve.

Welcome to ECON 482!

Published by sgreenla January 9th, 2009 sgreenla in Uncategorized. 0 Comments

The purpose of the seminar is to explore the global implications of the current US financial crisis. More precisely, we plan to investigate how the financial crisis and subsequent recession are likely to affect economies, politics and other aspects of societies in the rest of the world, both near term and in the longer run.

We use the term ‘explore’ literally. As the term begins, none of us has a good understanding of these global implications, though we hope to develop an understanding by the end. You are welcome to follow along and contribute to the conversation.

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