Political Science

The world is currently under the global financial crisis which begun back in the year 2008.  In the global capital markets, the pricing of an individual country industry mixing determines the measure of its growth. This however, uses ratio in price earnings of the portfolios of global industry. The future of the GDP and its real changes is strongly predicted by the growth opportunities and the investment in a particular country. Also, the segmentation and integration of markets plays a great role.

The world trade fell by 12 per cent last year- the biggest drop since the Second World War According to the World Trade Organization (WTO).  The Financial crisis has shaken the Davos consensus on the supremacy of free market capitalization and the benefits of globalization. In Europe, the global economic crisis is eminent and the region is strongly affected.

This has led to increased interest rates in some countries. This includes Israel, Norway and also Australia in the late 2009.There is the raising of reserve requirements in both India and China and the tightening of the fiscal policy. This will try to control the overheating of the economy. The stagnation of the Germany economy in the fourth quarter with a 0.7 per cent growth in GDP has immense effect to the euro.

The European Union is stalled out where it expanded with 0.1 in the fourth quarter down from 0.3 in the previous quarter. For the euro era, the case was the same with 0.1 expansion, down from the 0.4 I the previous quarter.  In the fourth quarter, the Greece economy shrunk by 0.8, than in the third quarter whereas countries like Italy and Spain with big economies kept on contracting even more. The biggest threat to the global economy at the moment is clearly economic weakness. The Greece central bank said. While planning to address budget deficits, leaders shouldnt take their eyes off the ball.
China is currently the worlds leading exporter after its 17.7 increase, surpassing Germany in December. The imports increased by 15 and this drove high U.S trade balance to very high levels of40.2 billion, up from 36.4 billion. This led to the restrictions on imports from the EU and the USA. The EU restricted on shoes whereas the US did on tires. The US exports on car parts and poultry was then restricted in China.

The Chinese are contemplating on a 3 rise in their currency later the year if their imports keep on booming in the markets. China is experiencing a rapid economic growth. In recent months, the Chinese exports have growth between 30 and 50 to India, Mexico, Brazil and Indonesia countries.

In Dubai, there has been experienced a drop in benchmark index where it has become one of the worst performers in the Gulf region. The largest investment bank went to the lowest this February since May for more than three weeks. The financial market General Index declined to 1,569.63 which was the worst since January. Dubai is more externally focused than some of the other countries in the Gulf, said Paul Cooper, managing director at Sarasin-Alpen  Partners Ltd. The worry is that the strong economic recovery we have seen in the past six to nine months globally is coming to an end, he said.
There is the upward trend of the rising cost of the governments spending.  In the U.S this has led to a gloomy job forecast with extended unemployment.

This has also led to reduced lending in the U.S banks to allow the economy to recover. The top tier banks are recovering, but many are still stagnated.

Inflation has been in the past quarter century causing great instability in the worlds economy.
Calculation of Inflation involves the use of the measures of Consumer Price Index (CPI) and the Retail Price Index (RPI). Considering there are basic needs that one cannot do without, inflation thus affects people way of living severely.

The consequences of inflation poses a great threat to the policy makers allover the world since it affects all businesses up to including the individual as a whole. It creates a difference in monetary policy as well.

This is creating widespread challenges ,where inflation drag below the target due to the downside risk to demand and output  thus unable to set the interest rates.

Inflation rate in developed countries lies from 1 to 4in the developed countries and that of developing countries is of 5to 20 with the worst hit country being Zimbabwe. Inflation in one way or another is driven by the policies. Good policy paves way for low inflation.  This calls for tax hike and cutting of spending.

What I will not welcomewhat I rejectis the same old grandstanding when the cameras are on, and the same irresponsible monetary and budget policies when the cameras are off, Mr. Obama said as he was addressing inflation. Its time to save what we can, spend what we must, and live within our means once again.  The White Houses estimate at 3, of economic growth from the fourth quarter of 2009 to 2010 in January was just slightly higher than the December months Blue Chip consensus forecast of 2.9. Its growth estimate for 2011, at 4.3 is rosier than the 3.2 forecast of private economists.

When we look at essential inflation, the poor households experienced a rise in the cost of living. The case was opposite in the rich households since their cost of living fell.

Inflation will rise from 1.5 per cent to about 3 per cent next year. It is expected to fall below the Bank of Englands 2 per cent target by the end of 2010. (Sakong II, 2010 as he was referring to the global financial crisis).

Monetary policies in the UK in times of stable and low inflation have been focused on price control for stability. This forced them to target the key stress alleviation that is as a result of the disruption in the financial markets.  UK GDP is expected to fall by 4.75 per cent this year. It will then grow by between 1 per cent and 1.5 per cent next year and 3.5 per cent in 2011 and 2012.The inflation in the Bank of England is currently at 1.5 percent and is expected to rise to about 3 per cent over the year. It is expected to fall below the Bank of Englands 2 per cent target by the end of 2010.

The United States and U.K leaders are proposing taxes on the banks. This in the case would help to bail out the costs during the financial crisis.  The consumer prices in the U.S fell in January with the exception of food and energy. This is the report from the Labor Department. But the many debts being incurred by many governments and many households might welcome a little inflation.  The paying off and the burden of servicing would then be reduced. This would in turn raise the inflation, through the income generated to pay off. A higher inflation goal would have a fairly immediate and disruptive effect on markets, said Bruce Kasman, chief economist at J.P. Morgan Chase. There is a forecasted upward shift in inflation above the 2 inflation goal in the popular central bankers.

The economy crisis in the Malaysian economy has recovered and in the last quarter of the year a record three percent growth in GDP was experienced. This is expected to continue in the year following the increasing spending in public sector and private sector sustained consumption. The recovery in the global economy had improved further in the fourth quarter of 2009. the Malaysia central bank said. This positive trend is expected to continue in 2010, although the pace of the global recovery is expected to be gradual and uneven, The private sector demand is the major determinant for the global growth.

All the sectors in the economic sector with the exception of the mining on the supply side experienced positive growth.

The global growth incurs some risks that might lead to the growth of the economy then a recurrent recession. These risks includes First, the fundamental causes of this recession are not yet resolved due to the misinterpretation of the sources of the crisis. This in effect has led to the poor policy response. Most likely, this crisis is as a result of the accumulation of debt. This calls for the ease in the monetary and fiscal policies. The countries with account deficits need to address their household to increase on savings and reduce on the spending. The developed countries are more with the deficit. These include many European countries, the U., U.K, Ireland, Spain, Ireland and Greece.

Considering the damage in the financial system, the credit ease will have to take sometime. Some banks have already been severely hit leading to the closure or the merging. The corporate sector is not an exceptional. They are under severe financial stress this has led to the cutting down of employment due to reduced profits. If the global economy grows at sub-par rates in 2010-11, corporate revenues will grow slower than otherwise (World Bank, 2009). And if deflationary pressures remain across the world--given the glut of supply relative to aggregate demand--pricing power of firms will be limited and profit margins will be further squeezed. The public debt is on a sharp rise. In this case, the policymakers should take into consideration the inflation solution. There is increased unemployment and this has led to lose of skills. There is reduced human capital taking for example, in the advanced economies the unemployment rate might close at 10 in 2010 according to OECD. Unemployment directly leads to reduced consumption spending and thus reduced growth. In conclusion, resolving the structural weaknesses will play a great role I the recovery of the economy. This might as well lead to reduced potential growth in this year and next year. The macroeconomic and financial policy support on the other side are helping to stabilize the world economy but the recession is still not over. The recovery is thus expected to derail and a lot need to be done to rebalance the global demand.