Trade Case Studies Assignment Example | Topics and Well Written Essays - 500 words

Trade Case Studies - Assignment Example The models of trade developed by Paul Krugman can also explain intra-industry trade as an outcome of economies of scale, monopolistic competition, and consumer preference for product diversity. The development in the field of geography led to his work crediting especially since it helps to explain the core periphery pattern of urbanization and migration as witnessed in much of the world. Also, Paul Krugman has made noteworthy contributions to the research on strategic policies of trade and currency crises. The trade businesses which have trade patterns that conform to Krugman’s theory are clothing, shoes, restaurants, and service businesses in major cities. The trade patterns conforming to Krugman’s theory exhibited by these businesses show that the costs of production reduce with increasing market prices resulting in lower equilibrium prices for the products. Globalization can have challenging drawbacks to some countries in the world. First, the importation of cheap products from developing countries could lead to high levels of unemployment in developed countries due to the high costs of production. Secondly, the specialization in particular products by some countries could lead to unemployment in other non-prioritised sectors of the economy. Finally, globalization has led to intense competition for upcoming businesses in developing countries and the ‘Dumping’ of goods below the cost of production price harming the businesses in those countries (Perloff, 2004, p.7). Globalization as a world issue of concern has had a positive effect on my life due to the creation of a free trade zone, elimination of trade restrictions such as trade tariffs, a wide range of products and services to choose from, and reduction of transportation costs, for example, the cost of shipping for goods The ignorance of the possible job losses in the

Government Intervention (Bailout) Term Paper Example | Topics and Well Written Essays - 1250 words

Government Intervention (Bailout) - Term Paper Example According to Nelson (2008), one of the main reasons that made investment banks undergo this transformation is panic. Panic is often the indirect result of any financial crisis, and banks have their own usual set of standard reactions in any financial crisis or recession. Since many financial companies, some of which were considered market leaders like Lehman Brothers have collapsed, there is panic among the remaining investment banks. The collapse of large banking industries puts pressure and fear in the banking world. Some of them the remaining banks are financially stable, but due to the fact that the financial market is unpredictable, they seek to consolidate their position through transformation to bank holding companies. Therefore, even though they have financial security, their own feelings of fear are dictating their responses to the market. Transformation to holding companies will enable the companies to have access to large deposits, which is considered to be a funding metho d that is more stable. Therefore, panic is one of the leading factors in the bank reactions to the economy and the United States government’s bailout plan. Other issues are also affecting the banking response in the United States. According to Plantin (2007), another reason for the change to holding banks is that the investment banks have realized that the model that propelled them to their success does not work anymore, as evidenced by the mortgage crisis, which necessitates a change in strategy. Changing up focus and goals can often be difficult for banks, since they are such large financial institutions, and therefore movement and change can be not only difficult, but frightening. The investment banks have realized that unlike them, commercial banks can mitigate risks through use of deposits from mortgages and savings accounts that are held by customers. This is in contrast to their operations which use majority of financing from other banks, and this is prone to uncertain ty, since such transactions can be recalled at any time, sometimes using mere telephone calls. Such investment banks have seen it fit to change their nature of operations and venture into commercial banking business that poses lesser risks. So a change of strategy is imminent, although usually slow in large financial institutions, and also quite stressful, only adding to the panic that banks are currently feeling. There is still one more aspect left to consider as far as the banks are concerned. Another major reason that has made investment banks convert to holding banks is to place them in a better position to benefit from various initiatives introduced by the Federal government to support institutions in the US financial sector. This is a response to the Bailout and will hopefully see banks improve their economic situation during this crisis. There are several benefits of shift to bank holding companies that need to be addressed in order to create a better understanding of the bai lout concept. The access to large deposits will enable the companies to increase the effectiveness of their operations throughout the globe. In fact, some experts say that American Express stands to gain by as much as $3.8 billion. American Express' application was approved a month after applying for it (Sloan, 2008). This is due to the reason that while they were investment banks, they only had