Zeitgeist

PART 11: DON’T MIND THE MEN BEHIND THE CURTAIN

“Behind the ostensible government sits enthroned an invisible government owing no allegiance
and acknowledging no responsibility to other people” - Theodore Roosevelt
The real menace of any government is the invisible government that virtually runs our
government for its own selfish reasons.
1775, the American Revolution War began where America wants to detach from the
oppressing hand of England’s monarchy. The prime cause was that King George III of England
the interest-free independent currency of its colonies and then forced them to borrow money
from the Central Bank of England causing much distress and inconvenience.
1783- America won its independence from England.
However, the Central Bank concept still remains as the corrupt power-hungry mentality
rise with it.
Central Bank- an institution that issues and regulates the currency of an entire nation.
Their power includes the control of interest rates and the expansion and contraction of the
money supply(inflation) itself. However, the central bank does not give money to the
government for free. Instead, they loan it to them with interest. In short, this system produces
debt in the long-run. To pay the debt the government has a loan from the bank and since the
central bank has the sole control of manipulating the value of the money in a nation, the central
bank adds a perpetual amount of money in the economy for the government to pay their
temporary outstanding debt. Which in turn, creates more debt. This is what we call Debt Slavery.
The US Government tried to remove some central bank systems since the public is very
wary of that kind of institution. However, in the early 1900s(1907), the central bank pioneers
pushed once again and created a situation wherein the public is forced to re-establish the
central bank system once again. J.P Morgan, one of the financial luminaries at that time, used
his mass influence to create rumors that prominent banks in New York are insolvent and are on
the verge of bankruptcy. Because of this, people began to withdraw their deposits, and the
banks were forced to call in their loans, causing the lenders to sell their property, thus the cycle
of bankruptcy and repossession. A congressional investigation headed by Senator Nelson
Aldrich (later become part of the Rockefeller family-one of the King Bankers) suggested that
they should create a central bank to avoid the mass hysteria that happened in 1907. It was then
and write the Federal Reserve Act. Once it was finalized it was handed to Senator Aldrich to
push in in the congress and it was ultimately legalized by President Woodrow Wilson who was
backed by the bankers who provided him with campaign support.
The public was told that the Federal Reserve Act was an economic stabilizer that will
prevent the happening of the 1907 crisis again. The bankers now have economic control over
the nation’s economy. They manipulated the money system and caused the great depression
know to history. For the government to address this economic crisis, they called in all the gold
bullions owned by the citizens(Gold Seizure), robbing them of all the real wealth they
possessed. And in 1933, the gold standard was abolished. Therefore, the money is not based
anymore on anything.
 GLOBAL CAPITALISM- private ownership of the means of production- evolved from
feudalism and mercantilism
“Crony capitalism” -real-world practice- favorable government interventions and
government incentives to the business. Close ties between the government and the businesses.
For example, the war was extended by government officials to generate large profit.
4 Major Epochs
● Mercantile
● Classical
● Keynesian
 ● Global- based in the classical capitalism where a free market and laissez-faire
economics- hands off the government. With international policies to regulate
trade and corporations can now avail the efficiency of production process offered
by other nations,
FIVE CORE CHARACTERISTICS
1. Production takes place on the global stage-
2. Labor can be sourced around the world-
3. The financial system operates globally-corporations distributed their wealth around the
world. In here, tax can be evaded.
4. Power relations are transnational.-Capitalist groups were created that can shape the
policies for trade, finance, and production. Global corporations become some powerful
as to influence our everyday lives. Their power extends to the political leaders.
5. Global system of governance- we need organizations like world trade organizations,
United Nations. World economic forum, International monetary fund, and World bank.
They make laws that nations must conform for them to enter the global market. these
policies were also applied in the national governments.
IMPACTS
● Global Markets- global sourcing can affect your business(though you operate locally). If
the price of a material increase, you will have to look for another supplier or you have to
raise you price knowing that some of your customers will not be able to buy your
products.
● Multinational Threats- Large companies source our labors where it is cheapest and forge
partnerships with the overseas factories. They also build factories where the cost is
lesser. However, laborers suffer because they are paid less and the business owners
become richer.
● Currency exchange- there is uncertainty for the business if you buy your materials
overseas. Or ship your products abroad. The exchange rates are volatile. Though you
are expecting a P100 cost, the value of money in the country might be bigger than the
value of your money, thus you need to pay more than you expect.
● Increased Competition- Capitalism demands businesses to provide goods and services
for profit to the customers in exchange for a price that the customers are able and willing
to pay. Related to market concentration, demand, production costs, market share.
● Innovation- rewards the company with the ability to adapt and change. Consumers
choose those who offer a better quality of goods and services at low prices.
● Multinational regulatory environments- navigating a complex regulatory environment.
Country risk and risks brought by legislation, policies promulgated by trade
organizations. Permits, and passed the standards.

GLOBAL CORPORATION
Corporation- a legal entity, artificial being created by law that has a power to own something or
to be indebted to others. These are group of individuals.
Globalization of corporations is based on the initiative that the world is becoming more
homogeneous and the distinction between the market of other country gradually disappear.
Global company globalized their international strategy by taking advantage of the underlying
market costs, environment, and competitive factors.
MOTIVE: expand revenue/earnings and to diversify business risks.

DISTINCTION:
International Companies- importers and exporters. No investment outside their home country
Multinational Company- invested in other countries but do not have coordinated product
offerings in each country.
Global Corporation-invested and are present in many countries. Market their product through
the use of the same coordinated brand. Have one corporate office and global strategy.
Transnational Compay-invested in foreign operations, have central corporation, have central
corporate facility but give decision-making and marketing powers to each individual foreign
market.

GENERAL CHARACTERISTICS
1. Very high asset turnover
2. Network of branches
3. Control
4. Continued growth
5. Sophisticated technology
6. Forceful marketing strategy
GLOBAL CORPORATION USING TERMS OF GLOBALIZATION
● Market Presence- degree the company has globalized its market presence and customer
base. Oil and car companies score high in this dimension. Example: Market -World’s
largest retailer and they generate 30% of their revenue outside United States.
● Supply Base/Chain-the extent to which the company sources from different locations and
has located key parts of the supply chain in optimal locations around the world. Example
is CATetpillar- served customers of approximately 200 countries around the world.
Manufacturing 24 of them maintains research and development facilities in 9 countries.
● Capital Base-degree to which a company globalized its financial structure. Investments,
shares, attracting operating capital, finances growth, taxes and repatriation of profits.
● Corporate Mindset-extent to which the corporation’s ability to deal with diverse culture.
Adaptation. Depends on the leaders of the company and how they lead. This dimension
determines how the leaders interact and what information is collected, its processing,
and decision-making. Example: GE(General Electric)-managed through a global line of
business structure. Investments opportunities are identified on global basis. Diversified
employee nationalities and ideas.

MOVIE: ECONOMIC GLOBALIZATION

● Everyone has a stake but no one is in control
Dangers of the global economy:
● Terrorism
● Central government vs free market
INTERNATIONAL TRADE, TRADING BLOCKS, MULTILATERAL AGREEMENTS
International Trade-economic activity in which foreign markets exchange purchase, and sell
goods, services and information amongst each other. Includes the importation, exportation and
transportation of goods that makes the trade possible. Trade Agreements is also included which
regulized the trade between countries. Examples of which are setting quotas for restrictions,
and imports and exports policies. This also brings business and employment opportunities.

WHY we engage in international trade?

● Because of Comparative Advantage-leads ti specialization in producing certain products,
outsourcing and buying the erst from others.
● We want to expand into more markets - others may not have, others may have it. SO
there is an opportunity to expand.

RESULTS
● International trade begets GLOBALIZATION
● Interdependence amongst each other encourages cooperation
● Economic Growth- GDP
● Employment and business opportunities
● Access to things we don’t have before

Risks
● Political Risks- different political and economic systems may result in disagreements.
Different goals
● Dependence on exported goods- harmfull domestic producers and market because they
have to compete with foreign suppliers and producers. Consumers are also in danger
because they depend on these suppliers.
● Quality of goods and means of production- may result in harmful products, loss of trust
amongst traders.

To mitigate these risks we have trade agreements and government regulations.

INTERNATIONAL TRADING SYSTEMS

Past: Mercantilism- economic practice in Europe which emphasized state-centered,
government-controlled markets. Imports are low, exports are high because it was thought that
imports can harm the country. This led to the creation of East India Company and French East
India Company, monopolistic trading companies from Europe that exploited trade with Asian
Countries. The mother country gets the resources at a low price from the colonies and the
mother country gives back manufactured goods at a high price. The gold, silver, fur, lumber,
fossil fuels of a colony are owned by the mother country.

PRESENt: Open MArket and FREE trade

Open MArket- is an economic system with little to no barriers to free-market activity. It is
characterized by the absence of tariffs, taxes, licensing requirements, subsidies, unionization
and many other regulations or practices that interfere with free-market activity. Free markets
may have competitive barriers to entry but never any regulatory barriers to entry.

HOW IT WORKS:
1. Pricing of goods and services is driven predominantly by principles of supply and
demand.
2. Open markets go hand in hand with free trade policies.
3. Buyers and sellers from different economies may voluntarily trade without a government
applying tariffs, quotas, subsidies or prohibitions on goods and services.

Open Market and Free Trade

Many countries that are geographically close to one another are adopting a free trade
system where they have eliminated barriers to trade or limited their restrictions when trading
amongst each other.
Examples are:
● European Union
● Australia and New Zealand
● North American Free Trade Agreement (Canada, Mexico and the United States)
● Mercosur (Argentina, Brazil, Paraguay, and Uruguay)
● ASEAN Free Trade Agreement (Brunei, Indonesia, Malaysia, Philippines, Singapore,
Thailand, Vietnam)
WORLD TRADE ORGANIZATION
The World Trade Organization was established in the year 1995 with the essential purpose of
being a forum that nations to negotiate and discuss trade agreements.
Purpose:
● Mediate trade disputes
● Administer negotiations signed amongst nations
● Monitor trade policies
This is an essential part of how international trading systems work today because it shows that
more and more nations are cooperating with one another in achieving successful trading
transactions.
TRADING BLOCS
A trading bloc is a type of intergovernmental agreement, often part of a regional
intergovernmental organization, where regional barriers to international trade, (tariffs and
non-tariff barriers) are reduced or eliminated among the participating states, allowing them to
trade with each other as easily as possible.
International trade agreements can open up new opportunities for exporters. They can
also ensure access to competitively priced imports from other countries.
They can also ensure access to competitively priced imports from other countries.
The idea is that member countries freely trade with each other, but establish barriers to
trade with non-members, which has had a significant impact on the pattern of global trade.

What types of trading blocs are there?

● Free Trade Area
 Members agree to reduce or abolish trade barriers such as tariffs and quotas between
themselves. They maintain their own individual tariffs and quotas with respect to
non-members.
● Customs Union
Countries that belong to customs unions agree to reduce or abolish trade barriers
between themselves and agree to establish common tariffs and quotas with respect to
outsiders.
● Common Market
This is a customs union in which the members also agree to reduce restrictions on the
movement of factors of production – such as people and finance – as well as reducing
barriers on the sale of goods.
● Economic Union
A common market which is taken further by agreeing to establish common economic
policies on such things as taxation and interest rates and, even, a common currency.

Advantages for members of trading blocs

● Free trade within the bloc
● Market access and trade creation
● Economies of scale
● Jobs
● Protection

Disadvantages of trading blocs

● Loss of benefits
● Distortion of trade
● Inefficiencies and trade diversion

MULTILATERAL AGREEMENTS
GLOBAL FINANCIAL CRISIS
https://ivypanda.com/essays/global-financial-crisis-4/

MODERN WORLD-SYSTEM AS CAPITALIST WORLD ECONOMY

World economy- large geographic zone within which there isa division of labor and hence
significant internal exchange of basic or essential goods as well as flows of capital and labor.It is
not bounded by unitary political structure. Neither political nor culturalhomogeneity is to be
found in a world economy, what unifies it is the division of labor. Division of labor is provided by
the capitalist system.
Capitalists system- endless accumulation of capital
Capitalists world economy is a collection of many institution. Basic institutions are markets,
firms, households.
● Market- concrete local structure in which individuals or firms sell and buy goods
and virtual institutions across space where the same kind of exchange occurs.
● Capitalists need not a totally free market but rather a market that is only partially
free.

GEoculture- common cultural patterns

GOLD STANDARD
International Monetary System
Makes the exchanges and trades between nations peaceful. It governs the use of and
exchange of money globally. It’s not infallible.
1. Barter
Convenient before. Bullion-coins of silver and gold in Egypt

The world does not function as one; therefore difference in currencies

People shift from what is more complicated to what is more fluid because globalization
calls for innovation. Barter needs more effort and time thus abandoning the system.
2. First monetary system: Gold standard - fixed rates; determines the amount of money a
country can print because one needs to have an actual gold reserve equivalent to the
total amount of currency that circulates. Paper money cannot exceed that of the gold
reserve.
a. Advantages - reduced risks because exchange rates are the same
b. Disadvantages: WWI- countries print more money to support the military
expenses. Paper money > Gold reserve
c. Until 1920 due to war and great depression.
3. Bretton Woods System- dollar based monetary system
Incorporated some advantages of the gold standard; more flexible
Other currency =Dollar = gold ; money devaluation

Problem for both gold and bretton woods: reliance on a fixed exchange rates, having a
reserve. They rely on the US Dollars stability, however, U.S dollar is not forever.
4. Smithsonian Agreement-
5. Jamaica Agreement-Float system - currency of a country floats against another and
removes gold.