GLOBAL ECONOMIC IMBALANCES

Global Economic Imbalances

An Examination of the Current Issues of Global Economic Imbalances and Suggestion over Some of the Business Implications

1- Global Economic Imbalances

The measurement of economic inequality describes the well-being of a society. For instance, governments might identify financial differences between income groups experiencing wealth and those experiencing poverty. Outcomes might reveal the extent of imbalance over time; show where in the group poverty or wealth is occurring; and help determine descriptions and prescriptions of wealth and poverty in any given social context.

2- State Briefly the Content of the Discussion

The paper has been written using the sources mentioned in the list of references. The paper has been devided in different headings and all these headings discuss the topic in a concise and comprehensive way.

3- Current Account Balance, Exchange Rate (EURO & the USD)

Bracke (2008) mentions on the global level, economic disparities among nations might be studied to determine national living standards or quality of life. At the local level, investigations of economic inequality aid the assessment of mean incomes, levels of poverty occurrence, and income thresholds of deprivation, which allows policymakers and political theorists to create guidelines for minimum wage laws, taxes, tax breaks, social assistance and benefit programs, financial aid, unemployment insurance, and pension programs (Bracke, 2008).

What critics often find misleading in such calculations, however, is the extent to which they can hide true economic realities, that is, actual consumption patterns, inadequately measured basket-goods, the impact of inflation, real wage values, fluctuating interest rates, and other factors sometimes overlooked or ignored in num-bers-based studies.

4- Understanding Of Relevant Economic Principles

In the context of the economic principles it might be said that the energy shock to economic growth will be felt worldwide through the increasing global imbalance between high investment and low consumer spending, according to an analysis by The Conference Board, New York, a global research and business membership organization. The steady rise of international commodity prices since 2002 has been led by spiraling oil costs, although there has been a number of additional factors motivating these increases, including exceptionally low interest and inflation rates, a surge in emerging market demand led by heavy investment in China, the acceleration of global manufacturing activity in 2004, and a shortfall in natural resource investment for almost 20 years (Bracke, 2008).

The relationship between U.S. crude oil stocks and oil prices has become unhinged during the past year, probably due to new demand-supply factors heavily influenced by China.

These imbalances have generated major crises in the past, both in the U.S. and abroad, although there are important offsets--particularly by deep discounting of other prices—today (Wolf, 2008). Despite recent dips in energy prices, consumers across the U.S. nevertheless were hard hit in the short term. The recent energy shock is reminiscent of the 1970s. Rising gasoline prices have taken the energy share of consumer spending from about four percent in 2001 to 6.5% [at present]--the highest level in more than 20 years.

While oil prices hit new highs during the hurricane crises, the surge was ...