The Fed Funds Market since Last June

WASHINGTON (MarketWatch) - New construction of U.S. houses plunged to the lowest level in 17 years in March, the Commerce Department estimated Wednesday. Starts fell 11.9% in March to a seasonally adjusted 947,000 annualized units weaker than the 988,000 pace expected by economists surveyed by MarketWatch. This is the lowest level of starts since March 1991. Starts are dpwn 36.5% year-on-year. Starts of new single-family homes fell by 5.7% to 680,000 in March, while starts of large apartment units fell 24.6% to 267,000. Building permits, a leading indicator of housing construction, fell 5.8% to a seasonally adjusted annual rate of 927,000. This is the lowest level of permits since April 1991.

Taking the Temperature of the Current Financial Crisis

Yves Smith has a bigger, better, more colorful graph of the TED Spread--which has become the consensus indicator of the depth of the current financial crunch:

Financial Crisis Could Trap 53 Million More People in Poverty

Vulnerability Fund
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Crisis Hitting Poor Hard in Developing World
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Financial Crisis
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Vulnerable Countries Brief(pdf)
53 million more people could be trapped in poverty as global economic growth slows
Between 200,000 and 400,000 more babies could die each year between now and 2015 if the crisis persists
Some 40 countries are "highly vulnerable" to the effects of the crisis
February 12, 2009—The financial crisis is fast becoming a human crisis.
As many as 53 million more people could be trapped in poverty as economic growth slows around the world, according to new World Bank forecasts.
And in a blow to efforts to reduce infant mortality, between 200,000 and 400,000 more babies could die each year between now and 2015 if the crisis persists, the Bank predicts.
The new forecasts precede a meeting of the G7 finance ministers this weekend in Rome.
World Bank President Robert B. Zoellick will be at the meetings. He has urged developed countries to set aside 0.7 percent of their economic stimulus packages for a special Vulnerability Fund for developing countries.
“While much of the world is focused on bank rescues and stimulus packages, we should not forget that poor people in developing countries are far more exposed if their economies falter,” Zoellick said.
Some 40 countries are “highly vulnerable” due to pre-existing high rates of poverty and expected drops in growth.
Millions already living below the poverty line “will be pushed further below the poverty line” as a result of the global financial crisis, according to the new policy note, “The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens.”
“We know that after the food and fuel crisis of a year ago, the estimates were that we could see an addition of about 100 million people to the ranks of the poor, and we think this crisis, in its severity, will top that,” says World Bank Vice President for Poverty Reduction and Economic Management Danny Leipziger.
Almost one-third (29 percent) of all developing countries are “highly exposed” to the poverty effects of the crisis. Another 62 percent are moderately exposed and face decelerating growth or high poverty levels. Less than one tenth have relatively low exposure, according to the policy note.
“While in the short-run, the nonpoor may be the most affected by the crisis, the adverse impacts are likely to spread in the medium-term to poor households,” the paper says.

Fiscal Policy

Fiscal sustainability is a good starting point for the discussion of growth-oriented fiscal policy because unsustainable public finances inevitably lead to crises. This being said, the work program on growth-oriented fiscal policy goes beyond fiscal sustainability: it also includes issues of tax policy and development, composition of public expenditure, sub-national finance, and the role of fiscal policy in dealing with climate change.
Fiscal Policy: PRMED undertakes work on debt, fiscal policy and growth in Middle-Income Countries (MICs); tax policy and the efficiency of public expenditure policy; climate change, and the role of fiscal policy in managing volatile oil revenues.
Fiscal Sustainability, Risks and Vulnerabilities: PRMED has developed a comprehensive toolkit for fiscal sustainability in the context of uncertainty. The tool has its roots in traditional fiscal-sustainability analysis, but incorporates several new features that reflect modern developments. It allows for explicit analysis of the effects of uncertainty not just through scenario analysis, but also through full stochastic analysis allowing Value-at-Risk assessments. Given the uncertainty and risks posed by the current oil shock, the tool was extended to account for commodity price risks and possible risks stemming from declining production volumes.
Subnational Finance: With worldwide decentralization, the sustainability of sub-national finance is vital. The sub-national finance work covers: sustainability frameworks for analyzing how sub-national fiscal adjustment responds to reforms, shocks, and the interplay of national and sub-national policies; sub-national taxation and transfer systems; ex-ante legislative frameworks, including fiscal responsibility legislation regulating sub-national borrowing; and sub-national insolvency mechanisms for debt workout and restructuring.

Growth Analytics

PRMED pilots country growth studies and works in collaboration with Country Economists to incorporate growth strategies in Country Assistance Strategies (CASs), Country Economic Memorandums (CEMs), and lending products. PRMED also develops tools, and adapts state-of-the-art methodologies for growth analysis.
Inclusive Growth:What is the Inclusive Growth program about? There is widespread agreement that economic growth is a necessary and crucial condition for poverty reduction, as well as evidence that the pattern of growth—how growth is generated and distributed—is critical for accelerating poverty reduction. Inclusive growth is growth in which economic actors from all parts of the income distribution increase their well-being by contributing and benefitting from the growth process. While there is broad agreement on the basic policies that are important for growth and inclusive growth, the need for strong country specific diagnostics has been underscored as critical for prioritizing and shaping these policies to fit country needs.
Country Growth Analyses: PRMED applies a variety of innovative frameworks for growth analysis to identify bottlenecks to growth and inclusive growth. It also offers tools for growth analysis including:
Long-run growth forecasting and accounting toolkit
Growth and export processing arrangements toolkit for assessing the economy-wide implications of duty drawback reform.
Growth in Emerging Markets: Economic growth of China and India has been accompanied by rapid growth in world trade and increase in commodity prices. PRMED – in partnership with the Development Economics Vice Presidency (DEC) – has initiated a project analyzing the implications of these economies’ rise for other developing countries.
Economic Diversification and Sustainable Growth: This project studies how countries can explore options for structural transformation by diversifying their exports in a competitive world. With the use of a new database and constructs based on product-space and income-based diversification concepts, a variety of country-specific and regional papers analyze this theme for Economic and Sector Work (ESW) as well as CEMs. A web-based tool is available for country economists to do their own analysis.
Examples of flagship products:
Technology, Adaptation and Exports: How Some Developing Countries Got it Right documents the success of several developing countries in devising institutions to adapt technologies for sustained economic/export growth in 10 sector-specific case studies.
Small States, Smart Solutions Flagship studies whether small states warranted special treatment by the Bank and the international community.

Economic Policy and Debt

The Economic Policy and Debt Department (PRMED) is the unit within the World Bank's Poverty Reduction and Economic Management (PREM) Network responsible for the Bank's work on economic policy and financing for growth including growth analytics, national and sub-national fiscal policy, strategic debt issues, debt management, and related knowledge dissemination. PRMED also supports the Heavily Indebted Poor Countries (HIPC) Initiative implementation and crafts the Bank's position in the global debate on debt issues.
February 2009
IMF-OECD-WB Seminar on the Response to the Crisis and Exit Strategies - Joint Statement
February 2009
Burundi Reaches Completion Point under the Enhanced HIPC Debt Relief Initiative
February 2009
Inclusive Growth: Key to Identifying Development Priorities
January 2009
How can Korea Raise its Future Growth Rate?
January 2009
The Republic of Cote d'Ivoire - Preliminary Document
January 2009
PRMED Knowledge Brief: What Is Inclusive Growth?
January 2009
B-Span: Debt Relif and Beyond Conference

...More
The debt management work program includes two components: the Debt Management Performance Assessment (DeMPA) tool and technical assistance in designing and implementing Medium-Term Debt Management Strategies (MTDS) ....more
Debt Management Performance Assessment (DeMPA)
Medium-Term Debt Management Strategies (MTDS)
Debt relief work relates to the implementation of the Heavily Indebted Poor Countries (HIPC) Initiative, the Multilateral Debt Relief Initiative (MDRI), and the administration of the Debt Reduction Facility (DRF) for IDA-only countries....more
Debt Relief At-A-Glance
Debt Reduction Facility (DRF) for IDA-Only Countries
Heavily Indebted Poor Countries (HIPC) Initiative
Multilateral Debt Relief Initiative (MDRI)
This joint World Bank-IMF framework aims to support Low-Income Countries’ (LICs) efforts to achieve their development goals without creating future debt problems...more
Debt Sustainability Framework for Low-Income Countries (DSF)
Sovereign Debt and Development in Market Access Countries (MACs)
Fiscal sustainability is a good starting point for the discussion of growth-oriented fiscal policy because unsustainable public finances inevitably lead to crises....more
Fiscal Policy
Fiscal Sustainability, Risks and Vulnerabilities
Subnational Finance
PRMED pilots country growth studies and works in collaboration with Country Economists to incorporate growth strategies in Country Assistance Strategies (CASs), Country Economic Memorandums (CEMs), and lending products....more
Inclusive Growth
Country Growth Analyses
Economic Diversification and Sustainable Growth
Growth in Emerging Markets
Small States
Dissemination of knowledge on economic policies and financing for growth is a critical part of PRMED’s work program activities....more
Knowledge and Learning
Conferences and Events
Contact Information

World Economic Situation and Prospects

World Economic Situation and Prospects is a joint product of the Department of Economic and Social Affairs, the United Nations Conference on Trade and Development and the five United Nations regional commissions. It provides an overview of recent global economic performance and short-term prospects for the world economy and of some key global economic policy and development issues. One of its purposes is to serve as a point of reference for discussions on economic, social and related issues taking place in various United Nations entities during the year. World Economic Situation and Prospects 2009 The world economy is mired in the severest financial crisis since the Great Depression. WESP of 2006, 2007 and 2008 had already warned of the risks for this to happen. All factors analyzed in those reports have now played out and have pushed the world economy into recession. Growth in world gross product (WGP) is expected to slow to 1.0 per cent in 2009, a sharp deceleration from the rate of 2.5 per cent estimated for 2008 and well below the more robust pace in previous years. While most developed economies are expected to be in a deep recession, a vast majority of developing countries is experiencing a sharp reversal in the robust growth registered in the period of 2002-2007, indicating a significant setback in the progress made in poverty reduction for many developing countries over the past few years. The prospects for the Least Developed Countries (LDCs), which did so well on average over the past years, are also deteriorating rapidly. Income per capita for the world as whole is expected to decline in 2009. The report analyzes in detail the evolution of the global financial crisis during 2008 and the more fundamental factors that led to its build-up. It further assesses the impact on global economic activity, especially in developing countries. The synchronized slowdown in both rich and poor countries is further evidence that the until recently widely held belief that developing country growth would have been ‘decoupled’ from that in the United States and Europe was dangerously misleading. The report also reviews the policy actions so far taken worldwide in response to the global financial crisis. The report recommends more forceful fiscal policy stimuli need to be taken in an internationally concerted manner in order to prevent the world economy from falling into a much deeper and more prolonged recession. The WESP further details a number of more fundamental reforms to the international financial system that are needed to reduce risks of a recurrence of such a devastating crisis in the future.

A Planned World Economy

The human race is getting to be too much for itself and too much for the world." - William Saroyan as quoted in Mankind at the Turning Point (1974)
The Club of Rome is a premiere think tank composed of approximately 100 members including leading scientists, philosophers, political advisors and many other characters who lurk in the shadows of power. This series of articles described the major conclusions of the 1974 book Mankind at the Turning Point: The Second Report to The Club of Rome [1]. Part 1 described their desire for the development of a totalitarian world system presented under the euphemism of an "organic society". Part 2 described the need to create a new value system to ensure the acceptance of the upcoming world government. This new value system will be based on a "world consciousness." Mankind at the Turning Point used an absurd, exponentially based computer model of the world system in an attempt to hide their predetermined conclusions behind the vale of science. One of the main scenarios developed by the model was an analysis of the price of oil. This was an obvious choice due to the importance of oil to the world economy and the Middle East oil crisis which began the previous year (1973). The conclusion of this analysis was that an optimal price exists for oil. A price too high, would encourage development of alternatives and result in long-term losses to the exporting nations. A price too low, would encourage over use and resource depletion which would result in long-term losses of the importing nations who would not have sufficient time to develop alternatives. Therefore, there existed an "optimal" price for oil and that the only way to obtain this price was through cooperation. Naturally, an optimal price would exist for all commodities and the only way to obtain these prices was a planned world economy. After all, a planned economy was working so well in the Soviet Union, why not extend it to the rest of the world? From Mankind at the Turning Point:
"The conclusion applies not just to oil, but to all of the finite resources - food, fertilizer, copper and so forth. The "most beneficial" price range and the proper rate of increase differ for each commodity, but the optimal level exists for all and should be determined and then on a global basis maintained by all participants in the world system - if recurrence of the world economic crises due to resource-constraints is to be prevented." [emphasis mine] - 100 "Indeed, nothing short of a complete integration of all strata, from individual values to ecology and mineral resources - and on a global scale - will suffice for the solution of the world food crises..." [emphasis mine] - 87
Redistribution of Industry Not satisfied with the control of resource prices the report also stresses the need for a planned redistribution of industry throughout the world, especially to South Asia.
"Scenario five - the only way to avert unprecedented disaster in South Asia - requires the emergence of a new global economic order. Industrial diversification will have to be worldwide and carefully planned with special regard for regional specificity. The most effective use of labour and capital, and the availability of resources, will have to be assessed on a global, long-term basis. Such a system cannot be left to the mercy of narrow national interests, but must rely on long-range world economic arrangements... But the strain on the global food production capacity would be lessened if the eating habits in the affluent part of the world would change, becoming less wasteful."

Global Resource Allocation System A planned economy would entail a powerful central government with the authority to allocate resources to areas it decrees most deserving.
"Now is the time to draw up a master plan for organic sustainable growth and world development based on global allocation of all finite resources and a new global economic system. Ten or twenty years form today it will probably be too late..." [emphasis mine] - 69 "The solution of these crises can be developed only in a global context with full and explicit recognition of the emerging world system and on a long-term basis. This would necessitate, among other changes, a new world economic order and a global resources allocation system." [emphasis mine] - 143
The horrors of this proposed system should be obvious to anyone, but for those without any imagination I will provide a quote from The Impact of Science on Society [2] by Bertrand Russell who was also a proponent of world government. The quote below highlights one of the benefits - in Russell's view - of such a world allocation system.
"To deal with this problem [increasing population and decreasing food supplies] it will be necessary to find ways of preventing an increase in world population. If this is to be done otherwise than by wars, pestilence, and famines, it will demand a powerful international authority. This authority should deal out the world's food to the various nations in proportion to their population at the time of the establishment of the authority. If any nation subsequently increased its population it should not on that account receive any more food. The motive for not increasing population would therefore be very compelling. What method of preventing an increase might be preferred should be left to each state to decide." -

Sources and acknowledgments

Acknowledgements
This survey has benefited from the help and advice of many economists, not all of them mentioned in the text. Particular thanks are due to Doug Elmendorf, Thomas Helbling, Subir Lall, Adam Posen, Eswar Prasad, Ken Rogoff and Arvind Subramanian.
Sources
“Global Financial Stability Report”, IMF, October 2008.
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“World Economic Outlook”, IMF, October 2008.
“System Banking Crises: A New Database” by Luc Laeven and Fabian Valencia. IMF Working Paper No 08/224. September 2008.
“The New Power Brokers: Gaining Club in Turbulent Markets”, McKinsey Global Institute, July 2008.
“Bubblemania”, Barclays Capital, Summer 2008.
“Global Commodities: a longer term vision for stable, secure and sustainable global markets”, HM Treasury, June 2008.
“Global Development Finance 2008: The role of international banking”, World Bank, June 2008.
“Reaping the Benefits of Financial Globalisation”, IMF, July 2007.
“A Pragmatic Approach to Capital Account Liberalisation”, by Eswar Prasad and Raghuram Rajan. Journal of Economic Perspectives, Vol 22, Number 3, Summer 2008.
“Sovereign Wealth and Sovereign Power” by Brad Setser. Council on Foreign Relations, Special Report No 37, September 2008.
“What happens during recessions, crunches and busts?” by Stijn Claessens, Ayhan Kose and Marco Terrones, IMF, August 2008.
“Big bad banks?: The impact of US Branch Deregulation on Income Distribution” by Thorsten Beck, Ross Levin and Alexey Levkov, World Bank, August 2007.
“Multilateralism beyond Doha” by Aaditya Mattoo and Arvind Subramanian. Peterson Institute for International Economics, Working Paper 08-8, October 2008.
“Banking Globalisation, Monetary Transmission, and the Lending Channel” by Nicola Cetorelli and Linda Goldberg, NBER Working Paper 14101, June 2008.
“Can Financial Innovation help to explain the Reduced Volatility of Economic Activity?” by Karen Dynan, Douglas Elmendorf and Daniel Sichel. Federal Reserve, November 2005.
“This Time is Different: Eight Centuries of Financial Folly" by Carmen Reinhart and Kenneth Rogoff. Princeton University Press, forthcoming (2009).
“Finance, Financial Sector Policies and Long-Run Growth” by Asli Demirgüç-Kunt and Ross Levine. March 2008.
“Finance and Growth: Theory and Evidence” by Ross Levine, September 2004.
OECD-FAO Agricultural Outlook 2008-2017, OECD.
“Food Price Inflation: Explanation and Policy Implications” by Karen Johnson, Council on Foreign Relations. July 2008.
“Financial Globalisation: A Reappraisal” by Ayhan Kose, Eswar Prasad, Kenneth Rogoff and Shang-Jin Wei. IMF Working Paper 06/189. August 2006.
“How does Financial Globalisation Affect Risk Sharing? Patterns and Channels” by Ayhan Kose, Eswar Prasad and Marco Terrones, IMF Working Paper 07/238, October 2007.
“Some new Perspectives on India’s Approach to Captial Account Liberalisation” by Eswar Prasad. Brookings-NCAER India Policy Forum 2008. July 2008.
“Does Openness to International Financial Flows Contribute to Productivity Growth?” by Ayhan Kose, Eswar Prasad and Marco Terrones, August 2008.
“Embracing Financial Globalisation”, HM Treasury, May 2008.
“Financial Stability, the Trilemma, and International Reserves” Maurice Obstfeld, Jay C. Shambaugh and Alan M. Taylor. July 2008

International finance

International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, and how these affect international trade. It also studies international projects, international investments and capital flows, and trade deficits. It includes the study of futures, options and currency swaps. Together with international trade theory, international finance is also a branch of international economics.
Some of the theories which are important in international finance include the Mundell-Fleming model, the optimum currency area (OCA) theory, as well as the purchasing power parity (PPP) theory. Moreover, whereas international trade theory makes use of mostly microeconomic methods and theories, international finance theory makes use of predominantly intermediate and advanced macroeconomic methods and concepts.

Economy – overview

[edit] 2005–2006

Current account balance 2006[1]
Global output (gross world product) (GWP) rose by 4.4% in 2005, led by China (9.3%), India (7.6%), and Russia (5.9%). The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 7% range of growth.
Growth results posted by the major industrial countries varied from no gain for Italy to a strong gain by the United States (3.5%).
The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output.
Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Central governments are losing decision making powers and enhancing their international collective power thanks to strong economic bodies of which they democratically chose to become part, notably the EU. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, poses economic risks because of varying levels of income and cultural and political differences among the participating nations.
Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada.

[edit] 2008
In 2008 after vigorous growth which produced a dramatic increase in the price of commodities such as oil and basic foodstuffs, the international economy began to slow in many countries providing relief from high commodities prices and increasing inflation. It was the opinion of some observers that the world economy had become somewhat overheated and was retracting to a more sustainable pace.[2]

[edit] Statistical indicators

[edit] Economy
GDP (GWP) (gross world product): (purchasing power parity exchange rates) - $59.38 trillion (2005 est.), $51.48 trillion (2004), $49 trillion (2002)
GDP (GWP) (gross world product) (IMF 179 countries [3]): (market exchange rates) - $43.92 trillion (2005 est.), $40.12 trillion (2004), $32.37 trillion (2002)
GDP - real growth rate: 4.3% (2005 est.), 3.8% (2003), 2.7% (2001)
GDP - per capita: purchasing power parity - $9,300 (2005 est.), $8,200 (92) (2003), $7,900 (2002)
GDP - composition by sector: agriculture: 4% industry: 32% services: 64% (2004 est.)
Inflation rate (consumer prices): developed countries 1% to 4% typically; developing countries 5% to 60% typically; national inflation rates vary widely in individual cases, from declining prices in Japan to hyperinflation in several Third World countries (2003)
Derivatives outstanding notional amount: $273 trillion (end of June 2004), $84 trillion (end-June 1998) ([4])
Global debt issuance: $5.187 trillion (2004), $4.938 trillion (2003), $3.938 trillion (2002) (Thomson Financial League Tables)
Global equity issuance: $505 billion (2004), $388 billion (2003), $319 billion (2002) (Thomson Financial League Tables)

[edit] Employment
Unemployment rate: 30% combined unemployment and underemployment in many non-industrialized countries; developed countries typically 4%-12% unemployment[citation needed]

[edit] Industries
Industrial production growth rate: 3% (2002 est.)

[edit] Energy
Yearly electricity - production: 15,850,000 GWh (2003 est.), 14,850,000 GWh (2001 est.)
Yearly electricity - consumption: 14,280,000 GWh (2003 est.), 13,930,000 GWh (2001 est.)
Oil - production: 79.65 million bbl/day (2003 est.), 75.46 million barrel/day (12,000,000 m³/d) (2001)
Oil - consumption: 80.1 million bbl/day (2003 est.), 76.21 million barrel/day (12,120,000 m³/d) (2001)
Oil - proved reserves: 1.025 trillion barrel (163 km³) (2001 est.)
Natural gas - production: 2,569 km³ (2001 est.)
Natural gas - consumption: 2,556 km³ (2001 est.)
Natural gas - proved reserves: 161,200 km³ (1 January 2002)

[edit] Cross-border
Yearly exports: $6.6 trillion (f.o.b., 2002 est.)
Exports - commodities: the whole range of industrial and agricultural goods and services
Exports - partners: US 17.4%, Germany 7.6%, UK 5.4%, France 5.1%, Japan 4.8%, China 4% (2002)
Yearly imports: $6.6 trillion (f.o.b., 2002 est.)
Imports - commodities: the whole range of industrial and agricultural goods and services
Imports - partners: US 11.2%, Germany 9.2%, China 7%, Japan 6.8%, France 4.7%, UK 4% (2002)
Debt - external: $2 trillion for less developed countries (2002 est.)

[edit] Gift economy
Yearly economic aid - recipient: Official Development Assistance (ODA) $50 billion...

[edit] Communications
Telephones - main lines in use: 843,923,500 (2007)4,263,367,600 (2008)
Telephones - mobile cellular: 3,300,000,000 (Nov. 2007)[3]
Internet Service Providers (ISPs): 10,350 (2000 est.)
Internet users: 1,311,050,595 (January 18, 2008 [5] est.), 1,091,730,861 (December 30, 2006 [6] est.), 604,111,719 (2002 est.)

[edit] Transport
Main article: Transport
Airports
Total: 49,973 (2004)
Roadway
Total: 32,345,165 km
Paved: 19,403,061 km
Unpaved: 12,942,104 km (2002)
Railways
Total: 1,122,650 km includes about 190,000 to 195,000 km of electrified routes of which 147,760 km are in Europe, 24,509 km in the Far East, 11,050 km in Africa, 4,223 km in South America, and 4,160 km in North America.
Broad gauge: 251,153 km
Standard gauge: 710,754 km
narrow gauge: 239,430 km
Ports and harbors:: List of seaports

[edit] Military
Military expenditures - dollar figure: aggregate real expenditure on arms worldwide in 1999 remained at approximately the 1998 level, about $750 billion, about 1/2 of which was the United States (1999)
Military expenditures - percent of GDP: roughly 2% of gross world product (1999).

[edit] References
^ Current account balance, U.S. dollars, Billions from IMF World Economic Outlook Database, April 2008
^ "U.S. and Global Economies Slipping in Unison" article by Peter S. Goodman in The New York Times August 23, 2008
^ global cellphone penetration reaches 50 percent

[edit] See also
List of most wealthy historical figures - The scope of the list is world-wide in history since the beginning of civilization.
Globality
Globalization
The Global Economy
Economy of Africa
Economy of Asia
Economy of Europe
Economy of North America
Economy of Oceania
Economy of South America
Energy policy
List of billionaires
List of countries by GDP sector composition
North American Industry Classification System
Steel production by country
List of world's largest economies (nominal) - based on current currency market exchange rates for 2007
List of world's largest economies (PPP) - based on purchasing power parity for 2007
Historical list of world's largest economies (nominal) - for the years between 1998 and 2003
Historical list of world's largest economies (PPP) - for the years between 1 and 1998
World
Trade route
Economics
Ecological economics
2007–2008 world food price crisis
Oil price increases since 2003

[edit] External links
Maps of the global economy
IMF - World Economic Outlook
UN DESA - World Economy publications
CIA - The World Factbook -- World
Career Education for a Global Economy
BBC World economy news
World Economies
Financial Times
Global Economy Portal
Retrieved from "http://en.wikipedia.org/wiki/World_economy"

World economy

The world economy can be evaluated in various ways, depending on the model used, and this valuation can then be represented in various ways (for example, in 2006 US dollars). It is inseparable from the geography and ecology of Earth, and is therefore somewhat of a misnomer, since, while definitions and representations of the "world economy" vary widely, they must at a minimum exclude any consideration of resources or value based outside of the Earth. For example, while attempts could be made to calculate the value of currently unexploited mining opportunities in unclaimed territory in Antarctica, the same opportunities on Mars would not be considered a part of the world economy – even if currently exploited in some way – and could be considered of latent value only in the same way as uncreated intellectual property, such as a previously unconceived invention.
Beyond the minimum standard of concerning value in production, use, and exchange on the planet Earth, definitions, representations, models, and valuations of the world economy vary widely.
It is common to limit questions of the world economy exclusively to human economic activity, and the world economy is typically judged in monetary terms, even in cases in which there is no efficient market to help valuate certain goods or services, or in cases in which a lack of independent research or government cooperation makes establishing figures difficult. Typical examples are illegal drugs and other black market goods, which by any standard are a part of the world economy, but for which there is by definition no legal market of any kind.
However, even in cases in which there is a clear and efficient market to establish a monetary value, economists do not typically use the current or official exchange rate to translate the monetary units of this market into a single unit for the world economy, since exchange rates typically do not closely reflect world-wide value, for example in cases where the volume or price of transactions is closely regulated by the government. Rather, market valuations in a local currency are typically translated to a single monetary unit using the idea of purchasing power. This is the method used below, which is used for estimating worldwide economic activity in terms of real US dollars. However, the world economy can be evaluated and expressed in many more ways. It is unclear, for example, how many of the world's 6.6 billion people have most of their economic activity reflected in these valuations.

The Cure To Our Economic Problems

would hate to be the winning Presidential candidate. Both candidates are delusional in thinking their economic policies will drag us out of a recession or even improve the economy. The reality is that the solutions offered by both are the equivalent of shuffling the deck chairs on the Titanic. They are meaningless.
You can cut taxes for 95pct of Americans and raise taxes for the rest. You can cut taxes for businesses and retain the Bush Tax Cuts. You can increase or decrease the capital gains tax 5 or 10pct either way. Under both programs the deficit for the country will increase, we will borrow and print more money. 5 or 10pct variance either way, given the big hole our economy is in wont matter.
The cure for what ails is us the Entrepreneurial Spirit of this country. We are a nation of people who encourage , support and invest in those of any and all age, race and gender who will use their ingenuity and come up with a new idea.
Its always the new idea that re energizes this country. Industry, manufacturing, transportation, technology, digital communications, etc, each changed how we lived and ignited our economy and standard of living. Tax policy has never done that. The American People have.
Entrepreneurs who create something out of nothing don’t care what tax rates are. Bill Gates didn’t monitor the marginal tax rate when he dropped out of Harvard and started MicroSoft (btw, it was a ton higher than it is today). Michael Dell didn’t wonder what the capital gains tax was when he started PC’s Limited, and then grew it into Dell Computer. I doubt that any great business or invention started with a discussion or even a consideration of what the current or projected income or capital gains tax was or would be.
The impact of tax rates on productivity and development is something economists masterbate about, enterpreneurs don’t waste their time thinking about it. We have business to do.
Entrepreneurs live to be entrepreneurs. I have never had a discussion with anyone about starting a business that included tax rates. Ever. If anyone that wanted an investment from me made a point of discussing tax rates as an impact on their business, I wouldnt invest in them. Ever.
Entrepreneurs live for the juice of making their dreams come true. Of having a vision and fighting to see it come true. The joy of mission accomplished and the scoreboard of the financial rewards.
We are in an economic mess right now. It doesn’t matter who caused it. It’s here. It doesn’t matter what our Presidential candidates and their economic advisors come up with. Its meaningless.
The cure to our economic problems is the Entrepreneurial Spirit of All Americans. Instead of bitching at each other, could one Presidential candidate please show even the least bit of leadership and character and stand up for and encourage the entrepreneurs in this country ?
i dont care who is friends with whom, who preached when you went to church, whether you know the actual role of the Vice President, whether you voted with President Bush. I dont care about any of the mudslinging going back and forth. All it does is waste the time of every potential voter. All of that is meaningless.
What we need is our candidates to stop yelling at each other and starting looking at the American people and encouraging the best of who we are. That is who I want to get behind. That is what I would like to see for our country. That is what will energize and motivate people to create companies and invent products that will turn the economy.
The best time for little guys to start a business is when the big guys are worrying about surviving in theirs. You dont need to raise money. You need to be smart and be focused. I had no idea until this current financial crisis that when I started MicroSolutions, my first company, it was in the middle of a very bad recession. I had no idea whatsoever. I didnt know what the tax rates were, and I didnt care. I had an idea, a floor to sleep on and a lot of motivation.
Now is the time for Entrepreneurs to step up and do our part for our country. Its up to us to start businesses and create jobs. That is the cure to this country’s economic problems.

Economy of scale

Economy of scale

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The increase in output from Q to Q2 causes a decrease in the average cost of each unit from c to C1.
Economies of scale, in microeconomics, are the cost advantages that a business obtains due to expansion. They are factors that cause a producer’s average cost per unit to fall as output rises.[1] Diseconomies of scale are the opposite. Economies of scale may be utilized by any size firm expanding its scale of operation. The common ones are purchasing (bulk buying of materials through long-term contracts), managerial (increasing the specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), and marketing (spreading the cost of advertising over a greater range of output in media markets). Each of these factors reduces the long run average costs (LRAC) of production by shifting the short-run average total cost (SRATC) curve down and to the right.

Contents[hide]
1 Overview
2 Examples
3 References
4 See also
5 External links
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[edit] Overview
This should not be confused with increasing returns to scale which is represented by the SRATC where simply increasing output within current capacity reduces the short run cost per unit.
This is, of course, an extremely simplistic example and, in real life, there are countering forces of diseconomies of scale. As these forces balance, an optimum production volume can be found (referred to as constant returns to scale).
This principle can be equally applied to an organization resulting in firms within a particular industry tending to be similar sizes. Economists have studied this effect as the theory of the firm.
A natural monopoly is often defined as a firm which enjoys economies of scale for all reasonable firm sizes; because it is always more efficient for one firm to expand than for new firms to be established, the natural monopoly has no competition. Because it has no competition, it is likely the monopoly has significant market power. Hence, some industries that have been claimed to be characterized by natural monopoly have been regulated or publicly-owned.
In the short run at least one factor of production is fixed. Therefore the SRAC curve will fall and then rise as diminishing returns sets in. In the long run however all factors of production vary and therefore the LRAC curve will fall and then rise according to economies and diseconomies of scale.
There are two typical ways to achieve economies of scale:
High fixed cost and constant marginal cost
Low or no fixed cost and declining marginal cost
Economies of scale refers to the decreased per unit cost as output increases. More clearly, the initial investment of capital is diffused (spread) over an increasing number of units of output, and therefore, the marginal cost of producing a good or service is less than the average total cost per unit (note that this is only in an industry that is experiencing economies of scale)
An example will clarify. AFC is average fixed cost
If a company is currently in a situation with economies of scale, for instance, electricity, then as their initial investment of $1000 is spread over 100 customers, their AFC is .
If that same utility now has 200 customers, their AFC becomes ... their fixed cost is now spread over 200 units of output. In economies of scale this results in a lower average total cost.
The advantage is that "buying bulk is cheaper on a per-unit basis." Hence, there is economy (in the sense of "efficiency") to be gained on a larger scale.
Economies of scale tend to occur in industries with high capital costs in which those costs can be distributed across a large number of units of production (both in absolute terms, and, especially, relative to the size of the market). A common example is a factory. An investment in machinery is made, and one worker, or unit of production, begins to work on the machine and produces a certain number of goods. If another worker is added to the machine he or she is able to produce an additional amount of goods without adding significantly to the factory's cost of operation. The amount of goods produced grows significantly faster than the plant's cost of operation. Hence, the cost of producing an additional good is less than the good before it, and an economy of scale emerges. Economies of scale are also derived partially from learning by doing.
The exploitation of economies of scale helps explain why companies grow large in some industries. It is also a justification for free trade policies, since some economies of scale may require a larger market than is possible within a particular country — for example, it would not be efficient for Liechtenstein to have its own car maker, if they would only sell to their local market. A lone car maker may be profitable, however, if they export cars to global markets in addition to selling to the local market. Economies of scale also play a role in a "natural monopoly."
Typically, because there are fixed costs of production, economies of scale are initially increasing, and as volume of production increases, eventually diminishing, which produces the standard U-shaped cost curve of economic theory. In some economic theory (e.g., "perfect competition") there is an assumption of constant returns to scale.
In Porter's analysis, Elements of Industry Structure, 'Economies of Scale' is an element of 'Entry Barriers' concept. This is one of the fact which should be taken under care while entering an industry. In Porter's view, cost leadership strategy is realized through 'economies of scale' production thinking.

Current World Economic Overview

Current World Economic Overview

Global growth appears to have improved in the third quarter (Q3) of 2005. The firming up of global economic activity during the third quarter of 2005 and its broadening ambit suggests that the global growth could reach a level higher than the average for the period 1990-2004. For 2006, the International Monetary Fund (IMF) has projected world growth at 4.3 per cent with advanced economies growing by 2.7 per cent and emerging market and other developing economies growing by 6.1 per cent. Growth Rate Of Real GDPIn the US, real GDP rose by 3.7 per cent in Q3 on a year-on-year basis on the strength of business spending, with consumer confidence regaining much of the ground lost after the August hurricanes. The merchandise trade deficit has improved to US $ 64.2 billion in November. The US current account deficit narrowed in the third quarter to 6.2 per cent of GDP. The easy financing of the current account deficit reflected sustained foreign appetite for US assets. In the euro area, a recovery seems to be setting in with real GDP up by 1.2 to 1.6 percent in 2005. Conditions for emerging out of deflation steadily improved in Japan with real GDP growth rising to 2.9 per cent in Q3, driven mainly by domestic demand and supported by a rise in bank lending. Industrial production also rose by 1.4 per cent in November, increasing for the fourth month in a row, combined with signs of higher employment. Growth in Q3 remained robust in the developing countries led by Chinese Economy (9.4 per cent), Hong Kong (8.2 per cent) and India (8.0 per cent). In Russia and Latin America, too, growth has been buoyant, except for Brazil where real GDP fell in Q3 by 2.8 per cent. High oil prices, domestic capacity constraints and some building up of inflationary pressures continue to be seen as factors restraining growth for most developing countries. Effects Of Crude Prices In The International ScenarioDue to the moderation in international crude prices since September, consumer price inflation in the advanced economies has fallen in the fourth quarter of 2005. In the US, consumer prices dipped by 0.1 per cent in December, leaving inflation for 2005 at 3.4 per cent. In the euro area too, inflation edged down to 2.4 per cent in November from 2.5 per cent in the previous month. Deflation continued in Japan with overall consumer prices falling by 0.8 per cent in November, the biggest drop in three years. In major industrial countries, inflation appears to have been contained and spillovers of oil prices into wage increases have been moderate. By and large, price stability has been maintained in these countries in the face of the oil shock although asset prices, especially house prices, remain a cause for concern in terms of potential inflationary pressures and the repercussions on consumer spending and financial sector balance sheets. On the other hand, inflation has risen in major emerging market economies. Besides elevated levels of oil prices, tight non-oil commodity markets have imposed price pressures. Future spikes in crude oil prices continue to carry the major risk to prospects of global growth and stability. While demand generally drove oil prices up in 2004, the price increases in 2005 were also the result of supply disruptions, inadequate investment as well as the reduction in world oil spare capacity, which fell to its lowest level in over three decades. World oil prices have climbed throughout 2005 despite somewhat slower demand growth in both China Economy and the US Economy". Declines in petroleum product prices (especially petrol and diesel) during October-November due to mild weather in the northern hemisphere and ongoing hurricane recovery efforts in the US have been followed by some firming up of prices since December due to geopolitical factors. The average price of the Indian basket of international crude varieties (comprising Brent and Dubai Fateh) ruled at around US $ 60.0 per barrel in October-January 20, 3.8 per cent lower than in the preceding quarter but 41.5 per cent higher than a year ago.
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The international pass-through of oil prices to domestic retail prices has been varied across countries. While domestic retail prices (including tax) of petrol in December 2005 increased on a year-on-year basis by 22.5 per cent (in US dollar terms) in Canada and 16.9 per cent in the US, they declined by 4.9 per cent in Japan and Italy. Similarly, diesel prices increased by 23.5 per cent in Canada and 20.5 per cent in the US while they declined by 4.5 per cent in France. Comparatively, India’s domestic retail prices of petrol and diesel (average of four metros) increased by 14.6 per cent and 13.0 per cent, respectively, by January, 2006. While international crude prices have risen by 69.0 per cent between March 2004 and December 2005, domestic prices of petrol and diesel have increased by 34.0 per cent during this period; price of LPG increased by 16.4 per cent but there has been no increase in the price of kerosene. Since the tax component in retail prices varies from country to country, it is more appropriate to compare the position net of the tax component. The retail prices, net of taxes, of petrol and diesel have increased across the board in the developed world. While the increase in petrol prices ranged between 32.0 per cent in Canada, 21.1 per cent in the US and 1.1 per cent in Japan, that of diesel prices was between 29.0 per cent in Canada, 25.9 per cent in the US and 3.3 per cent in France. Prices for crude oil, petroleum products and natural gas are projected to remain high through 2006 because of continuing tightness in international supplies and increasing demand. According to the World Bank, a supply shock that reduces oil deliveries by 2 million barrels per day could push prices up to above US $ 90 per barrel, reducing global growth by 1.0 per cent and the growth of large low-income economies by 1.7 per cent. Global Trade Imbalances Due To Moderate Oil Prices
The financing of the large current account deficit of the US is increasingly becoming a cause for concern. Government saving has fallen in the US and Japan and household financial saving has virtually disappeared in countries with housing booms. On the counterpart side, many emerging markets, particularly in Asia, have run current account surpluses resulting in build-up of international reserves. The US current account deficit is projected by the OECD to exceed 7.0 per cent of GDP in 2007 with substantial surpluses elsewhere. Such a configuration could increase the probability of a disorderly unwinding of macro imbalances and disruptive movements in major currencies. Within the mounting global imbalances, oil-exporting countries are currently running large current account surpluses, repaying debt, as in the case of Russia, and building up assets. Oil exporting countries have been actively using their export revenue to buy financial assets in various countries. Thus, the rise in oil prices has represented a sizeable redistribution of income from oil consumers to oil producers, which could have an impact on global demand and the future course of unwinding of global imbalances.
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Monetary Policy Formulations Over The GlobeThe prospect of a faster pace of monetary tightening contributed to a sharp drop in equity prices around the world in early October. Equity markets rebounded strongly since November, boosted by signs of still robust growth in the US as well as announcements of mergers, share buybacks and dividend increases. Japan outperformed most other equity markets throughout this period. Upward revisions in policy rates had a surprisingly muted impact on the prices of emerging market assets. Emerging markets benefited from record inflows of foreign portfolio investment in 2005. As concerns about slowing US growth eased, emerging markets bounced back strongly from their late October lows. By late November, equity and bond prices had returned to their end-September highs and had generally reached record levels by early January 2006. Equity markets have, however, weakened overseas thereafter mainly on account of renewed firmness in global crude oil prices. Corporate credit default swap rates and bond spreads remained more or less unchanged in October although they have widened significantly since November. While long-term interest rates rose in many markets in September and October, they retreated slightly in November, and at the end of December it was still unclear whether the recent rise in yields would prove as ephemeral as previous increases. The increase in longer-term yields mainly reflected upward revisions to interest rate expectations over the near term. Further, the potential for rising energy costs to add to inflationary pressures was a key focus of investors’ attention. The rise in implied volatility also reflected growing uncertainty about the economic outlook. During December 27-30, 2005 yields on 10-year US Treasuries fell briefly below those on two-year notes for the first time since December 2000, inverting in intra-day trading and signalling expectations that interest rates could fall in future that is generally associated with weak growth. This inversion came as analysts were finally anticipating an end to the current tightening cycle and a lower long-term risk premium than in the past. In January 2006, however, the spread has turned positive again. The US dollar appreciated by 3.5 per cent in trade-weighted terms during 2005 and a similar trend continued in January 2006. Of the major central banks, the US Federal Reserve has raised its policy rate by 25 basis points each on thirteen occasions from 1.0 per cent in June 2004 to 4.25 per cent by December 2005 while recently providing indications of nearing the end of the cycle of measured rise in the policy rate. The Bank of England has kept its repo rate unchanged at 4.50 per cent since August 2005 in response to slowing domestic growth. The European Central Bank (ECB) has raised its policy rate by 25 basis points in response to rising inflationary expectations, after holding it unchanged at 2.0 per cent since June 2003. Monetary policy has been tightened in several economies in emerging Asia, primarily in response to higher fuel prices and to the measured pace of policy tightening in the US. Bank Indonesia raised its policy rate by 50 basis points to 12.75 per cent on December 6, 2005 which was the tenth successive increase during the year. In Thailand, the 14-day repurchase rate was increased for the seventh time since January 2005 from 2.00 per cent to 4.25 per cent on January 18, 2006. Monetary authorities in Singapore and Hong Kong raised their policy rates by 187 basis points and 200 basis points, respectively, during the year up to December. In Malaysia, the policy rate was hiked to 3.0 per cent in end-November, 2005. In emerging market economies in general, the direction of policy change has been towards either tightening or withdrawal of the accommodative stance.