The Electronic Herd.docx

3 Pages
Unlock Document

Western University
Political Science
Political Science 2211E
Adam Harmes

The Electronic Herd:  Technology, finance and information created the key elements in today’s globalization system: o Blew away the walls o Created the networks for the “Electronic Herd” and “Supermarkets” to emerge o Created new efficiencies o Lowered barriers to entry into virtually every business o Forced people to think globally first and then locally rather than vice versa  Electronic Herd: global market of anonymous stock, bond and currency traders and multinational investors connected by screens and networks o Consists of two basic groups:  “Short-horn Cattle”:  people involved in the buying and selling of stocks, bonds, and currencies around the world  can and often do move their money around on a very short-term basis  can be anyone  “Long-horn Cattle”:  Multinationals increasingly involved in foreign direct investment: building factories or subcontracting overseas factories to make or assemble their producing  Make long-term commitments  Pre-1970s Cold War System: o Government’s own monetary policy dominated the setting of its own interest rates o Government’s own fiscal policy was the dominant instrument for stimulating growth  Lift of Capital Controls in 1970s: o Democratization of finance, technology and information o End of the cold war system and fall of wall everywhere o Private sector became dominant in the global financial system o Emergence of supermarkets  Supermarket = mega markets of exchanges (i.e. NYSE)  Modern market: o One global market where no one is in charge o Means of economic growth at an idealized speed is by tapping into the global exchange markets o Responds to good governance and good economic management The Short-Horn Cattle:  Anyone can invest in an incredibly diverse financial products o Fall of capital control marked the rise of having everything for sale as stocks, bonds or derivatives  Almost anything can be turned into a bond  Opened up trillions of dollars’ worth of assets o Rise in average joe investors:  Mom and pops are investors  Locals in every country could invest  People are fooled into thinking that every market operate the same as Wall Street o Poor countries with large investment needs are no longer worried by lack of capital  Anyone can seek investment opportunity that offer the highest returns around the world  Edge in competition and ability to seize opportunity before everyone else shrinks o Investment bankers would gain edge by tracking weather reports and its impact on the market o Extra edge needs to be accompanied by larger bets:  Fund managers employing exotic trading products: options, derivatives, futures etc.  Leveraging trading products in order to expand each of their bets  Result: lose big and win big  Whole brokerage houses bought down by the bets of a single broker using leverage  Emergence of Hedge Funds: o Large pools of cash from wealthy individuals and institutions are gathered  Pool of wea
More Less

Related notes for Political Science 2211E

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.