Global Economics: The Top Five

Global Economics

Every year we see and hear report after report on how our economy is doing, but rarely do we see a comparison on how the top five countries are fairing along. Here we will take you through each of the top five economies of the world, and provide a brief description of how their economies are doing now and into the near future.

France

In U.S. dollars, France takes 5th place at $2.9 trillion. Per the OECD, France’s economy was stagnant the first half of 2014, but improved slightly during the summer months. GDP growth is expected to be slow, rising at just 0.4% during 2014. Budget deficit reduction through 2016 will be less than originally planned, with the 3% of GDP deficit not being reached until 2017 as opposed to the planned date of 2015.

Germany

Germany comes in 4th place at $3.9 trillion. Economic growth is weak in Germany, expected to come in at 0.2% during 2014. This is mainly due to weak activity in euro area trading partners and less demand growth in emerging economies. GDP growth is expected to gain strength through 2016 as a healthy job market and continued expansionary monetary policies help to boost private purchases and residential investments. The unemployment rate in Germany is expected to remain low, while price inflation will rise slightly.

Japan

In third place is Japan at $4.8 trillion. Japan’s output growth slowed down to ½ percent during 2014. This reflects the impact of the consumption tax hike; the weaker yen will help to sustain export growth, which will nudge inflation closer to the target of 2%. Because of the sharp output declines in the 2nd and 3rd quarters of 2014, the government has decided to postpone until 2017 the planned increase in the consumption tax rate.

China

$10 trillion puts China in 2nd place. Chinas economy looks like it will fall short of its government 2014 predictions with the loss of momentum during the first quarter of the year. The official growth target for 2014 is 7.5%, but economists are expecting that to come in at the more likely figure of 7.3%. This slowdown is expected to help reduce imbalances; job creation is still strong as the service sector continues to expand.

United States of America

At first place is the United States at $17.5 trillion. The economy is looking good, with the economy expected to grow steadily in the next few years through 2017. Continued increases in private employment will cause the unemployment rate to lower, although some pockets of the labor market will remain slow for a while to come. Industries such as healthcare will continue to grow at a rapid pace accounting for many new jobs. Monetary policies remain supportive; policy rates are not expected to start rising until mid 2015. The federal budget deficit has narrowed quite a bit, and for growth to continue the government will have to focus on spending associated with healthcare and old age pensions.

The Basics of Stock Markets and How They Work

stocks

Stocks are generally traded on stock exchanges which is where the convergence of buyers and sellers occurs. Stock exchanges can be physical locations and all transactions take place on the trading floor of the stock exchange. Traders can also work through virtual exchanges which occur through networked computers and through electronic trades.

Anyone who is looking to purchase shares of any company that is publicly traded, will in most cases require the assistance of a brokerage firm. It is possible to purchase and sell shares without brokerage firms although certain functional and legal challenges might arise. Stock brokers are registered and licensed and the securities and exchange sector is quite well regulated.

The stock market works on a systematic mechanism of the demand and supply system that determines the price of any stock. Stocks are sold or bought through an auction and stock brokers help by bringing buyers and sellers together. The highest bidder is allowed to purchase stocks that are up for sale.

A share of stock is basically a partial ownership in a publicly traded company. Buyers get to own a fraction of the company’s assets as well as its earnings mostly through an initial public offering (IPO). Companies offer share to the public because they need money to reinvest and expand the business. Only two avenues are available for companies to get such funds. This happens either through debt financing where the company borrows money, or through equity financing where the company sells stocks.

The stock market is generally the secondary market and this is where investors trade on stocks without any connection to the issuing company. When an individual wants to purchase stocks, they have to place an order with a brokerage firm. Brokerage firms have order departments and these departments then send the order to the floor of exchange. When a price is agreed upon for the shares, the order is executed and the brokerage firm confirms this with the buyer.

While many people know the prices of stocks, many are not aware how they can get involved in the stock market. An understanding of the health or the value of any company is essential if anyone wants to get involved investing in the stock market. It is also essential to undertake some research and learn how stock markets work. There are informative stock market books along with instructional information online for anyone who wants to learn.

When you own shares in a company, you are a shareholder. You are entitled to vote in the company and you can earn a percentage of the company’s profits. An increase in the demand for certain stocks will bring about an increase in the price of the stocks. Valuable stocks are usually less in supply. When a company makes critical investments and becomes successful, the prices of the company’s stock will increase. When companies perform poorly, the demand for their stocks will lower and the price of the stocks will go down.

Risks are involved in the sense that people speculate about future expectations in performance. Investors who feel that a company will have a better performance in the future will want to buy the company’s shares. Since it is practically impossible to forecast how business will happen and how a company will perform in the future, risks are involved and that is why investors have to understand what they are investing in.