introduction reveiw for interview

8/11/2019 Introduction Reveiw for interview

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INTRODUCTION:

For as long as there has been international trade, there has been internationalfinance. When an Egyptian merchant wished to import fine fabrics from

Babylon, he had to exchange his currency for the exporter, or pay in a mutuallyacceptable currency. The former would represent the elements of a foreignexchange market; the latter, a commonly accepted vehicle currency. If theexporter allowed the Egyptian merchant to defer payment, an internationalextension of credit had taken place.The present international capital market,however, has its roots in the nineteenth century proliferation of stocks and bonds that were issued in the American, China, and other countries, for sale inEurope. Most of these financed the railroads, canals, and other infrastructure projects in what were then the developing countries. Not only were thesefinancings essential to the development of the United States, Australia, andother nations, but the instruments and the problems stemming from them gaverise to a set of norms and laws governing private international finance.Simultaneously governments were experimenting with paper money and thegold exchange standard, whereby currencies values were fixed by thewillingness of governments to offer gold in exchange for a fixed amount of paper currency. But the system proved somewhat rigid, and in the earlytwentieth century costly lessons were learned in the arena of public monetary policy, culminating in the Great Depression and the competitive devaluation ofcurrencies in the 1930s.

By 1944, toward the end of World War II, the allied leaders were weary of war,economic and otherwise. At a famous meeting at Bertton Woods, NewHampshire, they established some fundamental rules aimed at stabilizinginternational monetary relations. The core of the agreement that was hammeredout contained two key elements:

1) To facilitate trade, governments should insofar as possible allow people tofreely convert one currency into another.

2) To forestall the use of currency exchange rates to gain a temporary exportadvantage, governments should fix their currencies external values, using theU.S. dollar as the keystone unit.

By the late 1960s this dollar standard came under strain as a result of U.S

inflation and the general divergence of monetary policies among the industrialcountries, and in 1971 the U.S. dollar was officially devalued. Two decades of


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floating exchanges rates ensured, until by the early 1980s, with vast capitalflows driving currencies far from their perceived fundamental values,governments began to yearn for the external monetary discipline that fixedexchange rates offer.

Closer to the end of World War II, the Bretton Woods agreement was signed asthe initiative of the USA in July 1944. The Bretton Woods Conference rejectedJohn Maynard Keynes suggestion for a new world reserve currency in favor of asystem built on the US dollar. Other international institutions such as the IMF,the World Bank and GATT (General Agreement on Tariffs and Trade) werecreated in the same period as the emerging victors of WW2 searched for a wayto avoid the destabilizing monetary crises which led to the war. The BrettonWoods agreement resulted in a system of fixed exchange rates that partlyreinstated the gold standard, fixing the US dollar at USD35/oz and fixing theother main currencies to the dollar - and was intended to be permanent. TheBretton Woods system came under increasing pressure as national economiesmoved in different directions during the sixties. A number of realignments keptthe system alive for a long time, but eventually Bretton Woods collapsed in theearly seventies following president Nixon's suspension of the gold convertibilityin August 1971. The dollar was no longer suitable as the sole internationalcurrency at a time when it was under severe pressure from increasing US budgetand trade deficits.

The following decades have seen foreign exchange trading develop into thelargest global market by far. Restrictions on capital flows have been removed inmost countries, leaving the market forces free to adjust foreign exchange ratesaccording to their perceived values. But the idea of fixed exchange rates has byno means died. The EEC (European Economic Community) introduced a newsystem of fixed exchange rates in 1979, the European Monetary System. Thisattempt to fix exchange rates met with near extinction in 1992-93, when pent-upeconomic pressures forced devaluations of a number of weak European

currencies. Nevertheless, the quest for currency stability has continued inEurope with the renewed attempt to not only fix currencies but actually replacemany of them with the Euro in 2001.

The lack of sustainability in fixed foreign exchange rates gained new relevancewith the events in South East Asia in the latter part of 1997, where currencyafter currency was devalued against the US dollar, leaving other fixed exchangerates, in particular in South America, looking very vulnerable. But whilecommercial companies have had to face a much more volatile currency


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Retail foreign exchange brokers:

Retail traders (individuals) constitute a growing segment of this market, both insize and importance. Currently, they participate indirectly through brokers or

banks. Retail brokers, while largely controlled and regulated in the USA by theCFTC and NFA have in the past been subjected to periodicforeign exchangescams. To deal with the issue, the NFA and CFTC began imposing stricterrequirements, particularly in relation to the amount of Net Capitalizationrequired of its members. As a result many of the smaller, and perhapsquestionable brokers are now gone.

There are two main types of retail FX brokers offering the opportunity forspeculative currency trading:brokers and dealers or market makers . Brokers serve as an agent of the customer in the broader FX market, by seeking the best price in the market for a retail order and dealing on behalf of the retail customer.They charge a commission or mark-up in addition to the price obtained in themarket. Dealers or market makers , by contrast, typically act as principal in thetransaction versus the retail customer, and quote a price they are willing to dealat the customer has the choice whether or not to trade at that price.

Non-bank foreign exchange companies:

Non-bank foreign exchange companies offer currency exchange and

international payments to private individuals and companies. These are alsoknown as foreign exchange brokers but are distinct in that they do not offerspeculative trading but currency exchange with payments. I.e., there is usually a physical delivery of currency to a bank account. Send Money Home offer an in-depth comparison into the services offered by all the major non-bank foreignexchange companies.

HISTORY OF FOREX:

Early 20th Century:

Only in the 20th century paper money start regular circulation. This happened by force of legislation, the efforts of central banks to manage money supplies,and government control of gold supplies.Within a country, this fiat money is asgood as any other form. Internationally, it is not. International trade has alwaysdemanded a money standard accepted everywhere.Gold and silver providedsuch a standard for centuries. An official Gold Standard regulated the value ofmoney for about a century, prior to the start of World War I in 1914.
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1929:

The dollar has been perceived as more of a has-been, due to the Stock Market

Crash and the subsequent Great Depression.1930:

The Bank for International Settlements (BIS) was established in Basel,Switzerland. Its goals were to oversee the financial efforts of the newlyindependent countries, along with providing monetary relief to countries withtemporary balance of payments difficulties.

1931:The Great Depression, combined with the suspension of Gold Standard, createda serious diminution in foreign exchange dealings.

World War II:Before World War II, currencies around the world were quoted against theBritish Pound. World War II crashed the Pound. The only country unscarred bythe war was the US. The US dollar became the prominent currency of the entireworld.

1944:The United National Monetary and Financial Conference at Bretton Woods, New Hampshire discussed the financial future of the post-war world. The majorWestern Industrialized nations agreed to a pegging of the US Dollar, which inturn was pegged at $35.00 to the troy ounce of gold. The future was designed to be stable, in part due to the tight governmental controls on currency values. TheUS dollar became the worlds reserve currency.1957:

The European Economic Community was established.

1967:

At the IMF meeting in Rio de Janeiro, the Special Drawing Rights (SDRs) werecreated. SDRs are international reserve assets created and allocated by the IMFto supplement the existing reserve assets.


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1971:

The Smithsonian Agreement, reached in Washington, D.C., had a transitionalrole to the free floating markets. The ranges of currencies fluctuations relative

to the US dollar were increased from 1 percent to 4.5 percent band. The rangeof currencies fluctuating against each other was increased up to 9 percent. As a parallel, the European Economic Community tried to move away from the USdollar block toward the Deutsche Mark block, by designing its own EuropeanMonetary System.In the summer of 1971, President Nixon took the United States off the goldstandard, and floating exchange rates began to materialize.

1972:

West Germany, France, Italy, the Netherlands, Belgium and Luxembourgdeveloped the European Joint Float. Member currencies were allowed tofluctuate within 2.25 percent band (the snake), against each other and 4.5 percent band (the tunnel) against the USD.

1973:

The Smithsonian Institution Agreement and the European Joint Float systemscollapsed under heavy market pressures. Following the second majordevaluation in the US dollar, the fixed-rate mechanism was totally discarded bythe US Government and replaced by The Floating Rate.

1978:

The International Monetary Fund officially mandated free currency floating.

1979: The European Monetary System was established.

1999:

January 1st, 1999, the Euro makes its official appearance within the countriesmembers of the European Union.

2002:

January 1st, 2002, the Euro becomes the only currency and replaces all othertwelve national currencies within the European Union and Monetary Market:


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Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal and Finland.

TODAY:

Today, supply and demand for a particular currency, or its relative value, is thedriving factors in determining exchange rates. Decreasing obstacles andincreasing opportunities, such as the fall of communism and the dramaticgrowth of the Asian and Latin American economies, have created newopportunities for investors. Increasingly vast amounts of foreign currencies began flowing into other countries banks.

The Market Hours:

The trading begins once the markets are officially open in Tokyo, Japan at 7:00PM Sunday, New York time. Afterwards, at 9:00 PM EST, Singapore and HongKong opens followed by the European markets in Frankfurt at 2:00 AM and inLondon at 3:00 AM. When the clock reaches 4:00 AM, the European marketsare in the hot spot and Asia just concluded its trading day. Around 8:00 AM onMonday, the US markets opens in New York while Europe is slowly goingdown. Australia will take the lead around 5:00 PM and when it is 7:00PM again,Tokyo is ready to reopen.

Major Currencies:

US Dollar The United States dollar is the worlds main currency a universalmeasure to evaluate any other currency traded on Forex. All currencies aregenerally quoted in US dollar terms. Under conditions of internationaleconomic and political unrest, the US dollar is the main safe-haven currency,which was proven particularly well during the Southeast Asian crisis of 1997-1998.As it was indicated, the US dollar became the leading currency toward theend of the Second World War along the Bretton Woods Accord, as the othercurrencies were virtually pegged against it. The introduction of the Euro in 1999reduced the dollars importance only marginally. The other major currencies

traded against the US dollar are the Euro, Japanese Yen, British Pound and theSwiss Franc.


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India's trade has reached a still relatively moderate share 24% of GDP in 2006,up from 6% in 1985.

Despite robust economic growth, India continues to face many major problems.

The recent economic development has widened the economic inequalityacrossthe country. Despite sustained high economic growth rate, approximately 80%of its population lives on less than $2 a day (PPP). Even though the arrival ofGreen Revolution brought end tofamines in India, 40% of children under theage of three areunderweight and a third of all men and women suffer fromchronic energy deficiency.

Indian economic policy after independence was influenced by the colonialexperience (which was seen by Indian leaders as exploitative in nature) and bythose leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state interventionin labor and financial markets, a large public sector, businessregulation, and central planning. Five-Year Plans of Indiaresembled central planning in the Soviet Union. Steel, mining, machine tools, water,telecommunications, insurance, and electrical plants, among other industries,were effectively nationalized in the mid-1950s. Elaborate licences, regulationsand the accompanyingred tape, commonly referred to asLicence Raj, wererequired to set up business in India between 1947 and 1990.

Jawaharlal Nehru, the first prime minister, along with the statisticianPrasantaChandra Mahalanobis, carried on by Indira Gandhi formulated and oversaweconomic policy. They expected favorable outcomes from this strategy, becauseit involved both public and private sectors and was based on direct and indirectstate intervention, rather than the more extremeSoviet-stylecentral commandsystem.] The policy of concentrating simultaneously on capital- and technology-intensive heavy industryand subsidizing manual, low-skillcottage industrieswas criticized by economistMilton Friedman, who thought it would waste

capital and labour, and retard the development of small manufacturers. The ratefrom 1947 80 was derisively referred to as the Hindu rate of growth, because ofthe unfavourable comparison with growth rates in other Asian countries,especially the "East Asian Tigers".

In the late 80s, the government led byRajiv Gandhi eased restrictions oncapacity expansion for incumbents, removed price controls and reducedcorporate taxes. While this increased the rate of growth, it also led to high fiscaldeficits and a worsening current account. The collapse of theSoviet Union,
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1951 80. It has the largest share in the GDP, accounting for 55% in 2007 upfrom 15% in 1950.

Business services (information technology, information technology enabled

services, business process outsourcing) are among the fastest growing sectorscontributing to one third of the total output of services in 2000. The growth inthe IT sector is attributed to increased specialization, and an availability of alarge pool of low cost, but highly skilled, educated and fluent English-speakingworkers, on the supply side, matched on the demand side by an increaseddemand from foreign consumers interested in India's service exports, or thoselooking to outsource their operations. The share ofIndia's IT industryto thecountry's GDP increased from 4.8 % in 2005-06 to 7% in 2008. In 2009, sevenIndian firms were listed among the top 15 technology outsourcing companies inthe world. In March 2009, annual revenues from outsourcing operations in Indiaamounted to US$60 billion and this is expected to increase to US$225 billion by2020. Tourism in Indiais relatively undeveloped, but growing at double digits.Some hospitals woo medical tourism.

Agriculture:

Farmers work inside a rice field in Andhra Pradesh. India is the second largest producer of rice in the world after China and Andhra Pradesh is the 2nd largestrice producing state in India withWest Bengal being the largest.Indiaranks

second worldwide in farm output.Agricultureand allied sectors likeforestry, loggingand fishingaccounted for 16.6% of the GDP in 2007, employed 60% ofthe total workforce and despite a steady decline of its share in the GDP, is stillthe largest economic sector and plays a significant role in the overall socio-economic development of India.India is the largest producer in the world ofmilk, cashew nuts, coconuts, tea, ginger, turmericand black pepper. It also hasthe world's largest cattle population: 193 million. It is the second largest producer of wheat, rice, sugar, cotton, silk, peanuts and inland fish. It is thethird largest producer oftobacco. India is the largest fruit producer, accounting

for 10% of the world fruit production

Banking and finance:

The Indian money marketis classified into: the organised sector (comprising private, public and foreign ownedcommercial banksand cooperative banks,together known as scheduled banks ); and the unorganised sector (comprisingindividual or family owned indigenous bankers ormoney lenders and non- banking financial companies(NBFCs). The unorganised sector and microcreditare still preferred over traditional banks in rural and sub-urban areas, especiallyfor non-productive purposes, like ceremonies and short duration loans.
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Since liberalization, the value of India's international trade has become more broad-based and has risen to Rs. 63,080,109crores in 2003 04 from Rs.1,250crores in 1950 51. India's major trading partners are China, the US, the UAE,the UK, Japan and the EU. The exports during April 2007 were $12.31 billion

up by 16% and import were $17.68 billion with an increase of 18.06% over the previous year. In 2006-07, major export commodities included engineeringgoods, petroleum products, chemicals and pharmaceuticals, gems and jewellery,textiles and garments, agricultural products, iron ore and other minerals. Majorimport commodities included crude oil and related products, machinery,electronic goods, gold and silver.

India is a founding-member ofGeneral Agreement on Tariffs and Trade(GATT) since 1947 and its successor, the WTO. While participating actively inits general council meetings, India has been crucial in voicing the concerns ofthe developing world. For instance, India has continued its opposition to theinclusion of such matters as labour and environment issues and othernon-tariffbarriers into the WTO policies.

Balance of payments:

Since independence, India's balance of paymentson its current accounthas beennegative. Since liberalisation in the 1990s (precipitated by a balance of paymentcrisis), India's exports have been consistently rising, covering 80.3% of its

imports in 2002 03, up from 66.2% in 1990 91. India's growing oil import billis seen as the main driver behind the large current account deficit. In 2007-08,India imported 120.1 million tonnes of crude oil, more than 3/4th of thedomestic demand, at a cost of $61.72 billion.

Foreign direct investment in India:

India has strengths in telecommunication, information technology and othersignificant areas such as auto components, chemicals, apparels, pharmaceuticals, and jewellery. Despite a surge in foreign investments, rigidFDI policies resulted in a significant hindrance. However, due to some positiveeconomic reforms aimed at deregulating the economy and stimulating foreigninvestment, India has positioned itself as one of the front-runners of the rapidlygrowing Asia Pacific Region. India has a large pool of skilled managerial andtechnical expertise. The size of the middle-class population stands at 300million and represents a growing consumer market. FDI inflows into Indiareached a record $19.5 billion in fiscal year 2006-07 (April-March), accordingto the government's Secretariat for Industrial Assistance. This was more thandouble the total of US$7.8bn in the previous fiscal year. The FDI inflow for
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2007-08 has been reported as $24 billion and for 2008-09, it is expected to beabove $35 billion. A critical factor in determining India's continued economicgrowth and realizing the potential to be an economic superpower is going todepend on how the government can create incentives for FDI flow across a

large number of sectors in India.Currency:

The Indian rupeeis the only legal tenderaccepted in India. The exchange rate ason 23 March 2010 is 45.40 INR the USD, 61.45 to a EUR, and 68.19 to a GBP.The Indian rupee is accepted as legal tender in the neighboring Nepal andBhutan, both of which peg their currency to that of the Indian rupee. The rupeeis divided into 100 paise. The highest-denomination banknote is the 1,000 rupeenote; the lowest-denomination coin in circulation is the 25 paise coin (it earlierhad 1, 2, 5, 10 and 20 paise coins which have been discontinued by the ReserveBank of India).

Income and consumption:

According to Times of India, "a majority of Indians have per capita spaceequivalent to or less than a 10 feet x 10 feet room for their living, sleeping,cooking, washing and toilet needs." and "one in every three urban Indians livesin homes too cramped to exceed even the minimum requirements of a prison

cell in the US." The average is 103 sq ft (9.6 m2

) per person in rural areas and117 sq ft (10.9 m2) per person in urban areas.

Employment:

Agricultural and allied sectors accounted for about 60% of the total workforcein 2003 same as in 1993 94. While agriculture has faced stagnation in growth,services have seen a steady growth. Of the total workforce, 8% is in theorganised sector, two-thirds of which are in the public sector. The NSSO surveyestimated that in 1999 2000, 106 million, nearly 10% of the population wereunemployed and the overall unemployment rate was 7.3%, with rural areasdoing marginally better (7.2%) than urban areas (7.7%). India's labor force isgrowing by 2.5% annually, but employment only at 2.3% a year.

Economic trends:

India's 300 million strong middle-class population is growing at an annual rate

of 5%. Shown here is a residential area in the Mumbai metropolitan area.
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In the revised 2007 figures, based on increased and sustaining growth, moreinflows into foreign direct investment, Goldman Sachs predicts that "from 2007to 2020, Indias GDP per capita in US$ terms will quadruple", and that theIndian economy will surpass the United States(in US$) by 2043. In spite of the

high growth rate, the report stated that India would continue to remain a low-income country for decades to come but could be a "motor for the worldeconomy" if it fulfills its growth potential. Goldman Sachs has outlined 10things that it needs to do in order to achieve its potential and grow 40 times by2050. These are

1. improve governance2. raise educational achievement3. increase quality and quantity of universities4. control inflation5. introduce a credible fiscal policy6. liberalize financial markets7. increase trade with neighbours8. increase agricultural productivity9. improve infrastructure and

ECONOMY OF THE UNITED STATES:

The economy of the United States is the worlds largest nominal economy. Itsnominal gross domestic product(GDP) was estimated at $14.2 trillion in 2009,which is about three times that of the world's second largest national economy,Japan. Its GDP by PPPis almost twice that of the second largest,China. TheU.S. economy maintains a very high level of output per person(GDP per capita, $46,442 in 2009, ranked at around number ten in the world). Historically, theU.S. economy has maintained a stable overall GDP growth rate, a lowunemploymentrate, and high levels ofresearch and capital investmentfunded by both national and, because of decreasingsaving rates, increasingly byforeign investors. In 2006, consumer spending made up 70 percent of the UnitedStates Gross Domestic Product.

Since 1976, the US has sustained trade deficits with other nations, and since1982, current account deficits; the nation's long-standing surplus in itstrade inservices was maintained, however, and reached US$140 billion yearly in 2008and 2009. In recent years, the primary economic concerns have centered on:high household debt ($11 trillion, including $2.5 trillion in revolving debt), highnet national debt ($9 trillion), high corporate debt ($9 trillion), high mortgage
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debt (over $15 trillion as of 2005 year-end), high unfunded Medicare liability($30 trillion), high unfunded Social Security liability ($12 trillion), highexternal debt (amount owed to foreign lenders), hightrade deficits, a seriousdeterioration in the United States net international investment position(NIIP) (-

24% of GDP), and high unemployment. In 2006, the U.S economy had itslowest saving rate since 1933. These issues have raised concerns amongeconomistsand national politicians.

The United States economy experienced a crisis in 2008 led by aderivativesmarket and subprime mortgage crisis, and a declining dollar value. OnDecember 1, 2008, the NBER declared that the United States entered arecessionin December 2007, citing employment and production figures as wellas the third quarter decline in GDP. The recession did, however, lead to areduction in record trade deficits, which fell from $840 billion annually duringthe 2006-08 period, to $500 billion in 2009, as well as to higher personalsavings rates, which jumped from a historic low of 1% in early 2008, to nearly2% in late 2009.

Education

There are 4,352 colleges, universities, and junior colleges in the United States.In 2007, Americans stood second only to Canada in the percentage of 35 to 64year olds holding at least two-year degrees. Among 25 to 34 year olds, thecountry stands tenth. The nation stands 15 out of 29 rated nations for collegecompletion rates, slightly above Mexico and Turkey. According to governmentdata, one-tenth of students are enrolled in private schools. Approximately 85%of students enter the public schools.

Immigration

As of 2009, the United States received4.31 immigrants per 1000 people, ranking 25th globally.

Energy:

The United Statesis the largest energyconsumer in terms of total use, using 100quadrillion BTUs2005. The U.S. ranks seventh in energy consumption per-capita after Canada and a number of small countries. The majority of this

energy is derived fromfossil fuels: in 2005, it was estimated that 40% of thenation's energy came from petroleum, 23% from coal, and 23% fromnatural
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gas. Nuclear powersupplied 8.4% and renewable energysupplied 6.8%, whichwas mainly from hydroelectric dams although other renewables are included.

Agriculture:

Agriculture is a major industry in the United States and the country is a netexporter of food. The United States controls almost half of world grain exports. Products include wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; forest products; fish.

Manufacturing:

The United States is the world's largest manufacturer, with a 2007 industrialoutput of US$2.69 trillion.

Main industries include petroleum, steel, motor vehicles, aerospace,telecommunications, chemicals, electronics, food processing, consumer goods,lumber, and mining. A total of 3.2 million one in six U.S. factory jobs havedisappeared since the start of 2000.

Finance:

The New York Stock Exchangeis the largest stock exchange in the world byvalue of its listed companies'securities. As of October 2008, the combinedcapitalizationof all domestic NYSE listed companies was US$10.1 trillion.

NASDAQ, is another American stock exchange. It is the largest electronicscreen-based equity securities trading market in the United States. Withapproximately 3,800 companies and corporations, it has more trading volume per hour than any other stock exchange in the world.

International trade:

The United States is the world's largest trading nation. Since it is the world'sleading importer, there are manyU.S. dollars in circulation all around the planet. The dollar is also used as the standard unit of currency in internationalmarkets for commodities such as gold and petroleum (the latter sometimescalled petrocurrency is the source of the term petrodollar). Large foreigneconomies such asChina, Japan, Arab states of the Persian Gulf, and the EUown huge dollar reserves (especially as the US is more in debt) so there is a fearthat they will move away from the dollar. China's reserves are more than $2trillion, the world's largest. China owns an estimated $1.6 trillion of U.S.
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securities. In 2008, the total U.S. trade deficitwas $695.9 billion, which is $1.8trillion in exports minus $2.5 trillion in imports.

Economic predictions and forecasting:

Predictions about the direction of the United States economy in the short termand long term are crucial factors in determining federal government policies, business decisions, and Federal Reserve decisions. Several institutions makeeconomic predictions, including:Global Insight, and the UCLA AndersonForecast. Various state agencies, including the California Department ofFinance, also make predictions.

Currency and central bank:

The United States dollaris the unit ofcurrencyof the United States. The U.S.dollar is the currency most used in international transactions. Several countriesuse it as their official currency, and in many others it is the de facto currency.

ECONOMY OF THE UNITED KINGDOM:

The United Kingdomis a major developed capitalist economy. It is currentlythe world's sixth largest by nominalGDP and the sixth largest by purchasing power parity. It is the third largesteconomy in Europe after Germany's andFrance's in nominal terms, and the second largest after Germany's in terms of purchasing power parity. Its GDPPPP per capita is the18th highest in theworld. The United Kingdom is also a member of theG7, G8, G-20 majoreconomies, the Commonwealth of Nations, the Organisation for Economic Co-operation and Development, the World Trade Organisation, and the EuropeanUnion.

The United Kingdom is one of the world's mostglobalised countries. Thecapital, London (see Economy of London), is a major financial centre forinternational businessand commerce,[7] the largest such in the world accordingthe Global Financial Centres Index. The British economy is made up (indescending order of size) of the economies ofEngland, Scotland, Wales and Northern Ireland. In 1973, the UK acceded to theEuropean EconomicCommunitywhich is now known as the European Unionafter the ratification ofthe Treaty of Maastrichtin 1993. The UK entered its worst recession sinceWorld War 2 in 2009 but climbed its way back into growth by Q4 of 2009. Therecovery from the recession is expected to be slow. The UK government

expects annual growth in 2010 to be between 1% and 1.5%; latest figures showthat GDP growth is expected to soar past predictions for 2010 with growth of
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3.1%. The government also predict that the UK economy will grow by between3% and 3.5% in 2011, far stronger growth than its EU counterparts. The UK isstill predicted to become the largest economy in the European Union by 2020,over taking both Germany and France due to forecasted strong growth in the

massive UK financial services sectors.]

Also a strong rebound is expected in theUK Manufacturing sector as the British Pound has fallen against the Euro andDollar meaning British goods are cheaper abroad, this will take business off EUneighbours where goods have become more expensive due to a rise in the euro;latest figures show that UK Manufacturing grew at its fastest pace for 15 yearsin Q1 of 2010. The OECD has also stated that the UK economy is growingfaster than all other G7 members apart from Canada.

This boom ended in 2008 when the United Kingdom suddenly entered arecession brought about by theglobal financial crisis. Beginning with thecollapse of Northern Rock, which was taken into public ownershipin February2008, other banks had to be partly nationalised. TheRoyal Bank of ScotlandGroup, which at its peak was the second largest bank in the UK and the fifthlargest in the world by market capitalisation, was effectively nationalised on 13October 2008, when the British Government announced it would take a stake ofup to 58% in the Group. By mid 2009, the HM Treasury had a 70.33%controlling shareholding in RBS, and a 43% shareholding through UK FinancialInvestments Limited ofLloyds Banking Group, formerly the fifth largest banking group in the UK. This recession has seen unemployment risesubstantially, from just over 1,600,000 in January 2008 to nearly 2,500,000 inOctober 2009 yet less so when comapared to countries such as Germany,France or Spain.

The UK economy had been one of the strongest EU economies in terms ofinflation, interest ratesand unemployment, all of which remained relatively lowuntil the 2008-09 recession. Unemployment has since reached a peak of justunder 2.5 million (7.8%), the highest level since early 1990s although this rateremains far lower than many other European nations. However, interest rateshave been slashed to 0.5%. In 2007, according to theInternational MonetaryFund, the United Kingdom had the ninth highest level ofGDP per capitain theEuropean Union in terms of purchasing power parity, afterLuxembourg, Ireland, the Netherlands, Austria, Denmark, Sweden, Belgium and Finland. However, in common with the economies of otherEnglish-speaking countries, it has higher levels of income inequalitythan many European countries. DuringAugust 2008 the IMF warned that the UK economic outlook had worsened due
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to a twin shock: financial turmoil as well as rising commodity prices. Bothdevelopments harm the UK more than most developed countries, as the UKobtains revenue from exporting financial services while recording deficits infinished goods and commodities, including food.

Recent economic performance

The UK entered a recession in Q2 of 2008, according to the UK Office of National Statistics (ONS) and exited it in Q4 of 2009. The revised ONS figuresof November 2009 showed that the UK had suffered six consecutive quarters ofnegative growth. As of the end of November 2009, the economy had shrunk by4.9%, making the 2008-2009 recession the longest since records began. InDecember 2009, the Office of National Statistics revised figures for the thirdquarter of 2009 showed that the economy shrank by 0.2%, compared to a 0.6%fall the previous quarter. In the 3 months to February 2010 the U.K. economygrew yet again by 0.4%.

It has been suggested that the UK initially lagged behind its European neighbors because the UK entered the 2008 recession later. However, German GDP fell4.7% year on year compared to the UK's 5.1%, and Germany has now posted asecond quarterly gain in GDP. Commentators suggest that the UK suffered a

slightly longer recession than other large European countries, as a result ofgovernment policy dating back to the policies of theThatcher governmentof1979, in which UK governments have moved away from supportingmanufacturing and focused on the financial sector. The OECD predicts that theUK will grow 1.6% in 2010. The unemployment rate recorded by theLaborForce Surveyfell in the fourth quarter of 2009, the first of the big 3 economiesin the EU to do so.

Gross Domestic Product (GDP) decreased by a (second revision) figure of 0.2 per cent in the third quarter of 2009, after a decrease of 0.6 per cent in thesecond quarter, according to the Office for National Statistics(ONS). There wasa 2.4% decline in the first quarter of 2009. The economy has now contracted5.9% from its peak before the recession began, the BBC reports.

In May 2009 the European Commission (EC) stated: "The UK economy is nowclearly experiencing one of its worst recessions in recent history." The ECexpected GDP to decline 3.8pc in 2009 and projected that growth will remainnegative for the first three quarters of 2009. It predicted two quarters of "virtualstagnation" in late 2009-early 2010, followed by a gradual return to "slight positive growth by late 2010"
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Industries:

Agriculture, hunting, forestry, and fishing:

Agriculture is intensive, highly mechanised, and efficient by Europeanstandards, producing about 60% of food needs with less than 2% of the labourforce (477,000 out of a total workforce of 31,598,000, 3rd quarter of 2007) Itcontributes around 2% of GDP. Around two-thirds of the production is devotedto livestock, one-third to arable crops.The main crops that are grown are wheat, barley, oats, oilseed rape, maize for animal feeds, potatoes and sugar beet. Newcrops are also emerging, such as linseed for oil and hemp for fibre production.Agriculture is subsidised by the European Union'sCommonAgricultural Policy.

Production:

Mining and quarrying:

The Blue Book 2006 reports that this sector added gross value of 21,876million to the UK economy in 2004.

Manufacturing:

In 2003, manufacturing industry accounted for 16% of national output in theUK and for 13% of employment. This is a continuation of the steady decline inthe importance of this sector to the British economy since the 1960s, althoughthe sector is still important for overseas trade, accounting for 83% of exports in2003. Manufacturing is an important sector of the modern British economy andthere is a considerable amount of published research on the subject of thefactors affecting its growth and performance

Electricity, gas and water supply:

The Blue Book 2006 reports that this sector added gross value of 17,103million to the UK economy in 2004. The United Kingdom is expected to launchthe building of new nuclear reactors to replace existing generators and to boostUK's energy reserves.

Construction:

The Blue Book 2006 reports that this industry added gross value of 64,747million to the UK economy in 2004.
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Financial intermediation:

London is the world's largest financial centre, with financial services based ontwo districts: 'The City' (theCity of London) and the Docklands (particularly

around Canary Wharf). The City houses theLondon Stock Exchange(sharesand bonds), London Metal Exchange(base metal and plastic futures), Lloyds ofLondon (insurance), and the Bank of England. The Docklands begandevelopment in the 1980s and is now home to the Financial Services Authority, as well as several important financial institutions (such asBarclays Bank, Citigroup and HSBC). There are now over 500 banks with offices inthe Cityand Docklands, with the majority of business in London being conducted on aninternational basis, with established leads in areas such asEurobonds, foreignexchange markets, energy futures and global insurance. The AlternativeInvestments Markethas acted a growth market over the past decade, allowingLondon to also expand as an international equity centre for smaller firms.

Public administration and defense:


Education:


Health and social work:


Currency:

London is the world capital forforeign exchangetrading. The highest dailyvolume, counted in trillions of dollars US, is reached when New York enters thetrade. Until relatively recently there was debate over whether or not the UKshould abolish its currency Pound Sterlingand join the Euro. The British PrimeMinister, Gordon Brown, pledged at the time to hold a public referendum basedon certain tests he set as Chancellor of the Exchequer
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ECONOMY OF EUROPEAN UNION:

The European Union (EU ) is an economicand political union of 27membercountries, located primarily inEurope. Committed to regional integration, the

EU was established by theTreaty of Maastrichton 1 November 1993 upon thefoundations of theEuropean Communities. With over 500 million citizens, theEU combined generates an estimated 28% share (US$ 16.45 trillion in 2009) ofthe nominal gross world productand about 21.3% (US$14.8 trillion in 2009) ofthe PPP gross world product.

The EU has developed asingle marketthrough a standardized system of lawswhich apply in all member states, ensuring the free movement of people, goods,services, and capital. It maintains common policies on trade,agriculture, fisheries and regional development. Sixteen member states have adopted acommon currency, theeuro, constituting the Euro zone. The EU has developeda limited role in foreign policy, having representation at theWorld TradeOrganization, G8, G-20 major economiesand at the United Nations. It enactslegislation in justice andhome affairs, including the abolition of passportcontrols by the Schengen Agreement between 22 EU and 3 non-EU states.

As an international organization, the EU operates through a hybrid system ofsupranationalism and intergovernmentalism. In certain areas, decisions aremade through negotiation between member states, while in others; independent

supranational institutions are responsible without a requirement for unanimity between member states. Importantinstitutions of the EUinclude theEuropeanCommission, the Council of the European Union, the European Council, theCourt of Justice of the European Union, and the European Central Bank. TheEuropean Parliamentis elected every five years by member states' citizens, towhom the citizenship of the European Unionis guaranteed.

The EU traces its origins from the European Coal and Steel Communityformedamong six countriesin 1951 and theTreaty of Romeformed in 1957 by thesame states. Since then, the EU has grown in size throughenlargement, and in power through the addition of policy areas to its remit.

Monetary union:

16 EU countries have introduced the euroas their sole currency.

The creation of a European single currency became an official objective of theEU in 1969. However, it was only with the advent of the Maastricht Treaty in1993 that member states were legally bound to start the monetary unionno later

than 1 January 1999. On this date the euro was duly launched by elevenof thethen fifteen member states of the EU. It remained an accounting currency until 1
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January 2002, wheneuro notesand coins were issued and national currencies began to phase out in the euro zone, which by then consisted of twelve memberstates. The euro zone has since grown to sixteen countries, the most recent being Slovakiawhich joined on 1 January 2009.

The euro is designed to help build a single market by, for example: easing travelof citizens and goods, eliminatingexchange rate problems, providing pricetransparency, creating a singlefinancial market, price stabilityand low interestrates, and providing a currency used internationally and protected againstshocks by the large amount of internal trade within the euro zone. It is alsointended as a political symbol of integration and stimulus for more. Since itslaunch the euro has become the secondreserve currencyin the world with aquarter of foreign exchanges reserves being in euro.

The euro, and the monetary policies of those who have adopted it in agreementwith the EU, is under the control of theEuropean Central Bank(ECB). Thereare eleven other currenciesused in the EU with all but two legally obliged to beswitched to the euro. A number of other countries outside the EU, such asMontenegro, use the euro without formal agreement with the ECB.

Budget:

The twenty-seven member state EU had an agreed budget of 120.7 billion for

the year 2007 and 864.3 billion for the period 2007 2013, representing 1.10%and 1.05% of the EU-27'sGNI forecast for the respective periods. Bycomparison, the United Kingdom's expenditure for 2004 was estimated to be

759 billion, and France was estimated to have spent 801 billion. In 1960, the budget of the then European Economic Community was 0.03% of GDP.

Agriculture:

The Common Agricultural Policy(CAP) is one of the oldest policies of theEuropean Community, and was one of its core aims. The policy has theobjectives of increasing agricultural production, providing certainty in foodsupplies, ensuring a highquality of life for farmers, stabilizing markets, andensuring reasonable prices for consumers. It was, until recently, operated by asystem of subsidies and market intervention. Until the 1990s, the policyaccounted for over 60% of the thenEuropean Community's annual budget, andstill accounts for around 35%.

Energy:

In 2006, the 27 member states of the EU had a gross inland energy consumptionof 1,825 million tonnes of oil equivalent (toe). Around 46% of the energy
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consumed was produced within the member states while 54% was imported. Inthese statistics, nuclear energy is treated as primary energy produced in the EU,regardless of the source of the uranium, of which less than 3% is produced inthe EU.

Infrastructure:

The EU is working to improve cross-borderinfrastructurewithin the EU, forexample through theTrans-European Networks(TEN). Projects under TENinclude the Channel Tunnel, LGV Est, the Frjus Rail Tunnel, the resundBridge and the Brenner Base Tunnel. In 2001 it was estimated that by 2010 thenetwork would cover: 75,200 kilometers (46,700 mi) of roads;78,000 kilometers (48,000 mi) of railways; 330 airports; 270 maritime harbors;and 210 internal harbors.

Education and research

Education and science are areas where the EU's role is limited to supportingnational governments. In education, the policy was mainly developed in the1980s in programmed supporting exchanges and mobility. The most visible ofthese has been the ERASMUS programmed, a university exchange programmedwhich began in 1987. In its first 20 years it has supported internationalexchange opportunities for well over 1.5 million university and college students

and has become a symbol of European student life.

ECONOMY OF JAPAN:

The economy of Japan is the second largest in the world, after theUnitedStatesat $5.07 trillionin terms of nominal GDPand third after the United Statesand China when adjusted for purchasing power parity. The workers of Japanrank 18th in the world in GDP per hour workedas of 2006. The Big Mac Indexshows that the wages in Tokyo are the highest among principal cities in theworld.

Japan used another technique, somewhat based on Krugman's, calledQuantitative easing. As opposed to flooding the money supply with newly printed money, the Bank of Japan expanded the money supply internally to raiseexpectations of inflation. Initially, the policy failed to induce any growth, but iteventually began to affect inflationary expectations. By late 2005, the economyfinally began what seems to be a sustained recovery. GDP growth for that year

was 2.8%, with an annualized fourth quarter expansion of 5.5%, surpassing thegrowth rates of the US andEuropean Unionduring the same period. Unlike
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previous recovery trends, domestic consumption has been the dominant factorof growth.

Despite having interest rates down near zero for a long period of time, the

Quantitative easing strategy did not succeed in stopping price deflation. This ledsome economists, such as Paul Krugman, and some Japanese politicians, tospeak of deliberately causinghyperinflation. In July 2006, the zero-rate policywas ended. In 2008, the Japanese Central Bank still has the lowest interest ratesin the developed world, deflation has still not been eliminated and the Nikkei225 has fallen over approximately 50% (between June 2007 and December2008).In recent years, Japan has been the top export market for almost 15trading nations worldwide.

Infrastructure:

As of 2005, one half ofenergy in Japanis produced from petroleum, a fifthfrom coal, and 14% fromnatural gas. Nuclear power in Japanmakes a quarterof electricity production and Japan would like to double it in the next decades.

Japan's road spending has been large. The 1.2 million kilometers of paved roadare the main means of transportation. Japan hasleft-hand traffic. A singlenetwork of speed, divided, limited-access toll roads connects major cities andare operated bytoll-collecting enterprises. New and used cars are inexpensive.

Car ownership fees and fuel levies are used to promote energy-efficiency.

Services:

Japan Airlines, though faced with massive debts as of 2010, is considered oneof the largest airlines in the world.

Japan's service sector accounts for about three-quarters of its total economicoutput. Banking, insurance, real estate, retailing, transportation, andtelecommunicationsare all major industries such asMitsubishi UFJ, Mizuho, NTT, TEPCO, Nomura, Mitsubishi Estate, Tokio Marine, JR East, Seven & I, and Japan Airlinescounting as one of the largest companies in the world. TheKoizumi government setJapan Post, one of the country's largest providers ofsavings and insurance services for privatization by 2014. The six majorkeiretsus are the Mitsubishi, Sumitomo, Fuyo, Mitsui, Dai-Ichi KangyoandSanwa Groups. Japan is home to 326 companies from theForbes Global 2000or 16.3% (as of 2006).
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I

introduction reveiw for interview

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