Read the assigned Forbes article and summarize in at least 100 words. In the article it talks about how inflation can be affected by de-globalization. It states though that this would only be possible if the federal reserve and the world’s other central banks would fail to see whats happening. Globalization has made it so that consumers can get goods more cheaply from countries with low labor costs or high tech usage. This increased globalization has therefore led to an increase to the supply of goods and to a lesser extent services and these come to us at a much lower price. This price reduction effect continues as long as globalization is increasing but if it levels off then prices stay low but they don’t continue to fall. This is important due to price reduction lowering inflation but will not continue to lower inflation if prices don’t keep continuing to fall. In 2022 businesses globally are trying to de-globalize their supply chains and this has helped us to see the vulnerabilty of our supply chains to disruptions. We have seen this in things like covid 19 and ukraine. Today companies are willing to pay a little more for a shorter safer supply chain however this is happening gradually as all of these companies are willing to pay a couple of percents higher for a product in this new stable safe supply chain aren’t willing to pay 20-30% more. However suppliers in North America and Europe have seen more demand and will increase productive capacity to meet demand. This eventually is going to reverse the current increase in prices. Shortening supply chains is not a pure increase in prices. If the effort succeeds in reducing disruptions, then we’ll have fewer price spikes, at the cost of higher prices in more normal of times. The Federal Reserve and other central banks around the world are required to keep an eye on the global supply issues, which they are doing. Additionally this would be much easier if the economies structure did not change. Also we must note that monetary policy cant be perfect and for anyone to know what’s going in in real time can be super difficult.
Reflect on what we learned in the course, find at least one chapter in the textbook where we discuss the related topic, and explain how the chapter(s) is related to the reported event in the article. Do this in at least 100 words. We can see points which relate to the article this in chapter 8 Foreign Economic cycles. I say this because it goes over things such as supply shocks, monetary policy in countries and commodity risk in smaller countries. This relates to how monetary policy must be watched and reacted to, and supply shocks and commodity risk in smaller countries relate to how Today companies are willing to pay a little more for a shorter safer supply chain because of how vulnerable our supply chains are to disruptions. We have seen this in things like covid 19 and ukraine. This makes us think about how me must find better ways to improve domestic production of goods. Additionally we can see in this chapter how a monitoring system has to be in place to track whether problems over sea are going to effect things like your market, supply chain, profit margins, how you should manage your finances, and everything else which relates to what central banks around the world are going to monitor which will affect the way trade is done.