The World Is Curved: Hidden Dangers To The Global Economy

Submitted By RyanGraywacz
Words: 1544
Pages: 7

The World Is Curved: Hidden Dangers to the Global Economy

The World Is Curved is an amazing book by David Smick, who describes the global financial crisis striking the world. The perspective in which David Smick writes about is through a liberal perspective. A liberal perspective can be defined as one who describes “the nature of an issue as it impacts society as a whole” (Petrick). In this book, was the theories of why the global market has been so volatile in recent years and what can be done about it through the eyes of David Smick; who was once a senior staff in the U.S. Senate and House of Representatives, as well as a leading macroeconomist advisor to some of the world’s largest hedge funds. Smick has a lot of experience with the stock markets, hedge funds, and the global economy as a whole due to his tremendous background in his governmental roles, as well as his roles in business such as being the CEO for Johnson Smick International. Smick constantly recalls upon his memory to describe what he believes are the causes for the high risk in financial funds today. He describes the world as “curved” because sight is very limited in the global market because there is always surprises and is becoming a dangerous place with no transparency. The global liquidity is making it even harder for financial analysts to predict what is happening because the amount of unknowns in the market are increasing and now more policymakers are relying more on their intuition/guts than information. He also describes the current global economy similar to the financial markets from 1870 to 1914 which set the stage for the Great Depression. The three main ideas behind Smick’s thoughts for such volatility in the financial markets are: the threat of China, Japanese housewives who have taken control of Japan’s savings, and that politics have unintended consequences when dealing with globalization. Smick describes his academic views of globalization by first describing a scenario of an event that occurred in his life, then using that event to make a valid argument as to why it effects globalization. The first argument he makes is that China is a huge threat to everyone’s wallets no matter where you are from. China is an “unpredictable force with the power to help or sink the world economy” (Smick 95). China becomes it’s own paradox because it is expanding due to unheard of enormous demands which causes jobs to be created and wealth, while on the other hand is becoming a financial bubble waiting to burst because of the expansion of the economy. It brings enormous benefit to the world economy but also the greatest danger for when it bursts because it will plummet global prices. Smick describes this with his own personal experience in China as a small group investment into China Cement. Despite some of the best people in the world in his group, the investment bombed due to corruption which China is very known for because the data it contains is unreliable. He learns that investing on something only based on trust in the accounting data is very problematic and realizes how many people fall into the same trap he did. China has no transparency yet, capital pours into the economy as a hotspot, and the leaders of China have no real power since it is a communist party in which a few hundred people have power and do what they can to uphold it. Smick also says Japan is skeptical of the Chinese economy, not because of jealousy, but because Japan was in a similar economic bubble in the 60s and is waiting for the new bubble to burst. The next idea Smick details is the Japanese Housewives and how they are affecting the global economy. As strange as it sounds, Japanese Housewives have a commanding height in the global financial system and very well affect the world economy. What started off as a hunt for greater return on savings in homes, it became one-fifth of all trading in Japan and now holds 1% liquidity which makes them one of the largest players in