A global market encompasses the entire world or a specific product or currency, influenced by international economic forces and regulation. Full global economic integration is rare, but re-emerged in the 20th century with free trade policies and China’s opening up. The modern global market is characterized by rapid capital flow, magnifying economic impact, and affecting commodity and currency markets.
A global market is an exchange of goods or services that crosses national borders to encompass the entire world or nearly the entire world. The term can be used to mean the sum total of all market activity taking place in the world. It can also refer to the market in a specific product or currency, as in the “global oil market”. Markets on this scale are influenced by a complex combination of international economic forces and the combined and interacting outcomes of regulation in all the nations that make up the market.
Full global economic integration has been a relatively rare historical phenomenon. The world economy was highly integrated in the run-up to World War I, but the chaos engendered by that conflict damaged world markets, and the Great Depression dealt it an almost crippling blow. In the following years, the idea of autarky, or national economic independence, was quite popular among economic theorists and planners. A truly global market for all goods and services only began to re-emerge towards the end of the 20th century, with the rise of free trade policies, the collapse of the Eastern Bloc, and China’s rapid opening up to foreign trade and investment.
The modern global market is characterized by the very rapid flow of capital from one sector to another and from one country to another in pursuit of profit. The stock and bond markets strongly influence each other. In some cases this magnifies the economic impact of events, as government bond or regional equity markets can come under quite intense pressure from global investors during times of perceived crisis. This phenomenon can put enormous pressure on currencies and national debts.
In 2011, the commodity market is one of those most affected by globalization. Economic developments in any nation now tend to impact commodity prices across the global economy. The oil sector is an almost ideal example of a global commodity market. Both the demand and supply of oil are highly inelastic. This lack of market flexibility means that a relatively small decrease in production or an increase in demand anywhere in the world can produce a large change in the value of oil worldwide.
The global currency markets are a particularly extreme example of this variety of markets. Currency trading, by its very nature, tends to involve the rapid flow of wealth, as investors seek greater short-term profits. This phenomenon has led to several efforts to limit the functioning of the global currency market, as the rapid and largely speculative buying and selling of currencies can have a substantially disruptive effect on markets for physical real goods.
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