Global Markets Flashcards
11/25 commodity prices decline in LR … None had positive trend
Harvey et al
Commodity market prices reduce because of fundamentals…. YED of commodities less than other goods
Prebisch singer hypothesis
Agreed complacency and over confidence in unregulated markets caused excessive risk taking …. Advocated minsky
Martin wolf
Giradi why more financial investors in commodity market
Low IR from FED caused search for yield
Deregulation in financial markets
Portfolio diversification after house price decline
influencing futures prices that are benchmark for spot prices
Girardi type of people in financial market
Commercial hedgers
SPECULATORS
Money managers
Commodity index funds
New financial architecture
Theory of deregulation, caused by emh
Wray
Crotty policy responses in wake of financial crisis
Replace emh Ban cdo and securitisation More regulations Smaller financial sector (minsky advocated smaller local banks where they knew borrowers) System to aliviate speculative bubbles
Friedman
Flat world thesis
Levelling the playing field for people worldwide
Anyone can now compete
Helped by Microsoft 3.0, Netscape browser, application software
McCann
High skilled industries agglomerate
Low skilled disperse
Transmission vs transaction costs
Tacit knowledge more as tech increased
Florida
Spiky world
Spread of clusters where inter connectedness has increased
Baldwins first unbundling
Cheaper transport allowed separation of production and market
North industrialised & south deindustrialised
Large income divergence between N&S
large surge in international trade and migration
Production clustered locally and dispersed globally
Baldwins second unbundling
Spread of ICT made it easier to communicate and coordinate at distance
Reversal of income divergence
South industrialises north deindustrialises
Trade-investment-services-IP nexus
Join supply chains not build them
Liberalisation (RTA’s)
Baldwins GVC’s governed by….
Battle between agglomeration and dispersion forces
Benefits of agglomeration
Demand and supply side linkages Knowledge spillovers (TACIT KNOWLEDGE, face to fact contact) Labour supply Motivation Observation Innovation Business environment Reputation Builds trust and relationships
Threshold effect
Cluster gets so big starts experiencing diseconomies of scale…. Some firms may move on
Cooks centrifugal and centripetal forces
In city of London
Centrifugal: labour supply, reputation, being close to suppliers
Centripetal, congested transport, regulations, cost of locating there
Porter how do clusters affect competition
Increase productivity
Driving innovation
Stimulate formation of new businesses
McCorriston commodity markets shocks D&S
Stated that the impact of shocks depended where you were on the diagram (I.e. How many stocks you had)
KINKED DEMAND CURVE
LOW ELASTICITY OF DEMAND AND SUPPLY =INELASTIC
Hellbling reasons why prices rose so high in financial crisis
1) emerging growth of financial markets
2) suppliers slow to respond to increased demands
McCorriston added som countries intervened to impose export quotas also raising prices
UNCTADS policy responses to increased financials satin of commodity markets
Tax high frequency trading
Make details on fundermentals more transparent/ better info
Establish scheme to deal with speculative bubbles
Tightening financial regulations
Financial investors in commodity markets
Giradi futures prices used as benchmark for spot prices
Growth in futures so steep could have only been caused by speculative borrowers as production did not increase by same amount over that time
Can separate price from that what should be justified under fundermentals
What happened in financial crisis
Savings glut…. Low IR… Innovation of securitisation…. Easy credit… Perverse incentives causing change of attitude… SIV…. Moral hazard of insurance and CDS… All created boom …. When it went bust people had lost a lot of money as CDO’s priced wrong (non transparent)so emh doesn’t work
