Thursday, 10 October 2013
What’s this is this debtceiling thing in the United States
The amount of debt they are allowed to rise
What happens if they don’t raise the debt ceiling?
1. They wont be able to pay the bill (biggest part of it is bonds) then what
2. They default on the debt. What happens?
3. If you stop paying your mortgage your credit rating goes down and if you
want to borrow money next time then you have to pay higher interest … so the
US would have to pay higher interest on the bonds so the dollar goes down….
If the government starts raising interest rates so the interest rates in general go
up. What happens then? 1. Consumer confidence and business confidence
goes down. what does this cost? 2. This causes recession the economy slows
down which can drag down the entire world economy down.
4. The US dollar in general is the reserved currency of the entire world. So if you
in a particular country your currency start to drop the way to get to stabilize
then you have to go and buy. No one really knows what happened all of
sudden that reserve currency is not the currency, which has faith in it.
5. United states if they vote it to 18 trillion unless they change their framework
they have to vote again.
If they start to pay off their debt maybe at some point someone would say lets
lower their debt interest rate.
Foreign wreck investment
Over a year ago in India had very strong restriction of how much a foreign
country can own a company.
FOREIGN DIRECT INVESTMENT:
No overall authority no ones controlling what’s going on.
There are the organizations that have some influence but no control.
A world without borders
149 countries are working towards world economy.
The home country where the money is coming from.
Host country is the country where the money is being spent
FDI: where the country spends money in another country (physical plant)
Greenfield investments: the establishment of a wholly new operation in a foreign
country Acquisitions or mergers with existing firms in the foreign country. Sometimes buy
it outright or sometimes buy a percentage.
The flow of FDI : the amount of inbound and outbound in a country.
But in general we are talking about a year.
Refers to the amount of FDI undertaken over a given time period
Stock of FDI total accumulated value of foreign investment in a given time.
Stock of FDI in Canada is all the foreign invest in Canada.
What are the patterns of FDI?
Both the flow and stock of FDI have increased over the last 30 years.
Most FDI is targeted towards developed nations United States and EU
However, South, East and South East Asia – China and Latin America are
FDI is increasing because
Fear of protectionism: if I am worried that I suddenly cannot send products to Europe
so they build plants there
Democratic political insti
Globalization is forcing firms to maintain in a presence arount the world: why is that?
So if you are pepsi and coke so if pepsi is going to move to south Africa the other
competitor coke is going to be there.
GFCF: this is the amount of money spent on factories stores office buildings, roads,
It creates a higher potential for economies in the country…why is that?
Any kind of development is going to help out it makes the country more globalized, it
makes the country much more attractive for investment. Its an indicator.
FDI is an important source fo capital ….
It’s the money that the government doesn’t have to spend
Once the companies move in and built business all of sudden the government has an
increased revenue in terms of taxes etc.
Growht of Global FDI 19902009
Drop off 200809
But up to from 19902008 there is an massive increase in the FDI inflow.
FDI growing dramatically even much more than the exports.
Growth of Global
If you look at the inflows and the outflows of FDI,
Exports were still growing dramatically why is that? Much faster than FDI why?
Because 1.available capital 2.
Why would export would have less of a hit than the FDI?
What are the Patterns of FDI? In terms of developing nations in terms of foreign investment
FDI GFCF > BACK in 2000 it was around the 21% of
FDI is a very significant source of income in both developing and developed world
What is the source of FDI?
Since World War II the US has been the largest source of country for FDI
Foreign assets owned 61% in developing nations.
35 million back in the time in Canada
This is the percentage of our investment in foreign investment.
Our outflow to united states decreased from 1995 to 2006
Over this time frame Canada has also increased its foreign invest overseas outside US
it has broaden it’s horizon.
There is a number of ways we can
Why choose FDI?
1. Exporting producing goods at home ant hen shipping them to receiving
country for sale..
2. Licensinggranting a foreign entity the right to produce and sell the firm’s
product in return for a royalty fee on every unit that foreign entity sells… just
hand in the drawing and manufacturing . Disadvantage: giving all information
of the company , you can very quickly lose control over the entity,
Exports is the least risk , but there are a lot of trade barriers in particular threatened
trade barriers, you also have to worry about the transportation cost.