Global Capital Market Risks and Rewards

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As I have seen in the movie, there is a greater risk in the global capital market. And in today’s economy is financing and financial integrated, the most controversial issue in international economics is the financial globalization. Trade liberalization is beneficial thus elimination of barriers to international trade in goods and services. In financial markets it includes the capital flows of different countries like Indonesia, Malaysia, South Korea, Brazil and Russia. The two main benefits of the Financial Globalization is first, the inter-temporal trade which tells about smoothing spending of time or also called as the “consumption Smoothing”. Second, is the risk diversification and like for example to understand this concept is that a man during his looking life, a person may reduce his current income and save it in order to maintain a high level of consumption during his retirement. Next example for this is that a student will learn so that he may seem comfortably today and pay back his loan by forgoing future consumption when his income is high. Poor countries like Bangladesh or Nigeria can increase their domestic income if it is high. Rich countries on the other hand can lend fund in global capital market so they can maintain a high level of consumption they enjoy now and into the future. Another concept is about the investment and growth and it brings high future income. Another term I’ve seen in the movie is about the diminishing returns to capital, this is the natural occurrence in the economy. It shows that there are lot of labourers who work in the factory and it should have more machines because it helps more productive in the workers. It shows also the percentage of United Kingdom net outflow of capital in 1880 there is 5% of total income and in 1913 it grows 10%, and as a result Argentina is now the richest country in 1870 that the per capita income is 40% and it grows one-fourth of its which is 75% in 1913. The year during 1870-1913 refer to the...
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