The Bankwatch

Tracking the consumer evolution of financial services

Global imbalances simply explained

Bank of Canada speeches are often very illuminating and clearly written.  While this speech fades off in the 2nd half, the first half has some very clear descriptive bits that nicely sum up globalisation and why it matters to us all.

The Paradigm Shifts: Global Imbalances, Policy, and Latin America | Bank of Canada

on supply of labour;

Although this paradigm shift to a multipolar world is fundamentally positive, it is also disruptive. Labour, capital and commodity markets are changing rapidly. The effective global labour supply quadrupled between 1980 and 2005 and may double again by 2050.1

on capital flows;

Cross-border capital flows have exploded, growing at a rate almost seven times the peak during the last wave of globalization.2

on demand for commodities;

Rapid urbanization underpins this growth. Since 1990, the number of people living in cities in China and India has risen by nearly 500 million, the equivalent of housing the entire population of Canada 15 times over (Chart 4). This process can be expected to continue for decades, since urbanization rates in China and India are currently 30 to 50 percentage points below those in Brazil, Mexico and Canada.

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Relevance to Bankwatch:

I wrote before about the root cause of the economic crisis being one of labour shifts based on a paper I cam across.  The statistic that the world labour market has grown by a factor of 4 is astounding.  As a bank focussed on the western, developed world the future of your customers is one of relatively lower incomes based on that statistic alone.

While Canada feels like it is doing well at the moment, it is one of those countries being pulled negatively one way by the labour shifts and positively the other way by the commodity ‘supercycle’ according to BofC. 

Written by Colin Henderson

March 26, 2011 at 14:19

Posted in Uncategorized

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