Globalization and Why What’s Happening the World Hits Your Wallet so Hard

by Kaitlyn Ranze

In this economics meme, the singer asks "what does it mean?" when it comes to globalization and markets

When it comes to your money, what’s happening in the world can have a big impact on what happens to the U.S. Dollar, your work, and your investments.

Globalization has made the world economy more interconnected than ever before. That means that what happens in one part of the world can have ripple effects that impact people, businesses, money, and investments half a world away.

Let’s dive in a little further.

What is globalization?

In its simplest form, globalization is the process of the world becoming increasingly interconnected. This can be seen in the rise of international trade, the spread of technology and information (hello, crypto), and the increasing number of people who are living and working abroad.

There are many benefits to globalization, including the fact that it allows businesses to expand into new markets and consumers to have greater access to goods and services. However, there are also some downsides, such as the fact that it can lead to a race to the bottom in terms of wages and working conditions.

Why has the world grown more interconnected?

The process of globalization was accelerated by advances in technology, which have made it easier for people to connect with each other and to transport goods and services around the world. One of the most important aspects of globalization is the rise of international trade. Now it’s easier for businesses to sell their products in foreign markets.

When trade and the supply chain is disrupted

The Covid-19 pandemic created a perfect storm that disrupted global supply chains and sent prices soaring for many goods in the marketplace.

The outbreak of the virus in Wuhan, China in December 2019 resulted in the country shutting down factories and businesses in an attempt to contain the spread of the disease. This had a ripple effect on countries around the world that relied on China for goods and materials, as production came to a standstill.

While some businesses were able to quickly adapt and find alternate sources for goods, others were not so lucky. The result was widespread shortages of essential items such as medical supplies, food, and personal protective equipment (PPE).

The sudden increase in demand for these items, coupled with the decrease in supply, led to prices skyrocketing. For example, the price of N95 masks, which are used to protect healthcare workers from contracting the virus, went from $0.97 in January 2020 to $7.77 by April 2020, an increase of over 700%.

The same was true for other items such as hand sanitizer and disinfectant wipes, which saw prices increase by over 400% and 300%, respectively.

Supply, materials, and housing prices

Why was there a sudden rise in housing prices in 2021? One is the cost of materials. The price of lumber, for example, more than doubled April 2020 to 2021. Pandemic-related shutdown of sawmills and decrease in the supply of trees being harvested, but not those aren’t the only factors that impacted housing prices.

The other factor is interest rates. Low-interest rates make it cheaper to borrow money. More homeowners and businesses were leveraging the low interest rates to make investments and buy homes. As interest rates have begun to rise, that demand has cooled off, leading to fewer buyers and lower prices.

(So, if you’re thinking of buying a house, now might be a good time to do it. Just be sure to shop around for the best deal with your mortgage interest rates and don’t over stretch yourself financially.)

What’s happening summer 2022: the demand for oil in Europe and a banking crisis in China.

As tensions between Russia and the West continue to simmer, Europe’s dependence on Russian oil is coming under scrutiny. The continent imports around 30% of its oil from Russia, and with relations between the two countries at an all-time low, it’s lead to disruptions. In fact

A major natural gas pipeline from Russia to western Europe shut down [uly 11, 2022] for annual maintenance as Germany prepared to give the green light for 10 coal-fired power plants to restart because of concerns that Russia may not resume the flow of gas as scheduled.

Gas pipeline shutdown starts amid German suspicion of Russia

In addition, many European countries have been hit hard, and are struggling to meet their own domestic demand as winter looms.

But what does the tensions between Europe and Russian mean for American consumers?

Well, for one, it means that we’re paying more at the pump. As tensions between Russia and the West continue to mount, oil prices have risen sharply in recent months. And since the U.S. is exporting record amounts of oil to Europe, Americans are paying more.

But it’s not just higher prices at the pump that we have to worry about. Europe’s dependence on Russian oil also gives the Kremlin a lot of leverage over countries in the region. For instance, Russia has been known to use its energy supplies as a political weapon, threatening to cut off countries that don’t toe the Kremlin line.

Oil prices have a significant impact on the stock market in the United States. Here’s a breakdown of some of the reasons why:

  • The U.S. economy is highly dependent on oil. Oil is used to produce gasoline, which powers vehicles, and it is also used in the production of many other products and materials.
  • When oil prices increase, it costs more to produce these products and materials. This ultimately leads to inflation, which can negatively impact the stock market.
  • Oil prices are also a major factor in world economic growth. When oil prices are high, it slows down economic growth and can lead to recession. This can also have a negative effect on the stock market.
  • Oil prices are a major concern for investors and can impact stock prices. When oil prices are high, it can lead to selling in the stock market.

A banking crisis in China

Some rural banks in Henan and Anhui China have been facing difficulties lately, and their customers are feeling the pain. As a result, nearly 400,000 customers have found themselves unable to access their money when they need it.

But experts worry that a much bigger financial problem could be looming [in China], caused by fallout from a real estate crash and soaring bad debts related to the Covid-19 pandemic.

China tries to stem growing anger over frozen bank deposits

Many of these banks have been closed down or are on the verge of collapse. So far, the Chinese government has been reluctant to provide any assistance to these rural banks. This has led to many American investors becoming extremely worried about the future of their investments in China.

As a result, American companies that have invested in these rural banks are now at risk of losing their money. This is yet another example of how globalization is impacting the American economy.

The banking crisis in China is having a ripple effect all the way over in the United States. Here’s why:

  • When Chinese banks have trouble, it affects the global economy.
  • The U.S. imports a lot of goods from China. If Chinese consumers have less money to spend, that means American companies will sell less to China. That could lead to job losses in the U.S.
  • The U.S. also has a lot of investments in China, so if the Chinese economy weakens, that could mean losses for American investors.
  • And finally, if the Chinese government starts selling off its holdings of U.S. debt to raise cash, to prop up banks, that could lead to higher interest rates in the U.S., making it more expensive for Americans to borrow money.

So while the banking crisis in China may seem far away, it could have a very real impact on the lives of ordinary Americans.

Globalization and the markets

The globalization of the world economy has had a profound impact on the stock market. In the past, the stock market was mostly influenced by events in the United States. However, with the rise of international trade, the stock market has become increasingly interconnected with the rest of the world. This is because businesses that are based in the United States often have operations in other countries, and their stock prices can be affected by events in those countries.

The same is true for the crypto market. The rise of global trade has led to the creation of a truly global marketplace for cryptocurrencies. This means that the price of Bitcoin or Ethereum can be affected by events in any country.

Why you should pay attention to international events

The point is, that what happens in the world can have a direct impact on your wallet. So it’s important to stay up-to-date on the latest news and events, even if they seem far removed from your everyday life.

So how can you stay aware of what’s happening globally? Here are a few tips:

  • Follow the news: Keep up with the latest headlines so you know what’s going on in the world.
  • Check the stock market: Pay attention to how different markets are performing. This can give you an idea of how global events are impacting the economy.
  • Monitor your investments: If you have investments, make sure to keep an eye on them. This way you can see how they’re performing in different global markets.

By following these tips, you can stay informed about what’s happening in the world and make better financial decisions.

Who knows? The next global event could have a big impact on your bottom line.

Related Reads:

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Long-Term Investments

What You and Other Investors Can Do to Change the World


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