Globalization

1. Explain globalization using cauliflower example

- 5 whammies of globalization
a. Prize of oil (Too much= lowers, too little=raises)
b. China produces less= consumes less oil
c. GDP equals lower currency validation (Canada’s GDP down= less value/US
GDP= more value
d. Climate change= less output= more price yield
e. Produce prices goes up and oil prices lower
- Example of globalization
Canada= 90% -> 93 cents China= 100h
70%-> 69 cents 65h

US-> $1 Canada-> 93 cents

$1 69 cents GDP lowers
- Oil prices
a. 2014=120 per barrel
b. 2016= 26 per barrel
c. GDP= lower currency= everything in Canada is more expensive
d. China=less production= buy less from Canada
e. Commodities=less sales=less GDP
2. US debt
- Current US debt = 31 trillion
- Current GDP= 23.3 trillion
- -7 trillion in total
- What happens if the U.S defaults on its debt?
a. U.S could lose roughly three million jobs
b. A worker with a 401(k) account could lose 20,000 in savings
c. New 30-year mortgages could cost an additional 130,000
 d. Borrowing across the board would become harder
e. Bigger price tags for everyday items
f. U.S national debt could increase by 850 billion

3. Debt ceiling
- Ex. 100,000 and he needs 200,000 (would you give him money just to take advantage
of him?)
- Obligation to give him what he deserves
- Increase the debt and decrease expenditures (such as: Medicaid, social security,
defense)
- You can’t be lowering and raising interest rates during a recession
- The debt ceiling is the limit of debt the US can take on
- The genesis of the US debt starts in WW1, selling war bonds (1917) and it has never
ended
- Raising the debt limit is not about new spending; it is about paying for previous
choices policymakers legislated
- The two biggest owners of debt in the US are the US government and the foreign
biggest owner is China
- If the debt hits the ceiling, the Treasury Department uses several accounting
gimmicks to postpone the day of reckoning, but these typically last only a few months
- If the debt limit is not raised, the amount of spending cuts or tax increases that would
be required would equal 1.5 trillion thus year and 14 trillion over the next 10 years
- The only other country that has a debt ceiling is Denmark
- The economic consequences of a large-scale, intentional default are unknown, but
predictions range from bad to catastrophic. In 1979, an error happened and it raised
U.S. borrowing costs by 40 billion.

4. Federal Reserve
- Avoid inflation
- Keep employment
 - Inflation each year should be 2% or less (7% currently)
- 3.5% employment rate currently
- To cool the economy, you must raise interest rates
- Fed Reserve 2% ->Major banks 4% -> Regional Banks 9% -> Local Banks 9%

5. Apple and iPhone in globalization

- The globalized manufacturing of an iPhone
a. There are hundreds of individual components and they come from all over the
world
b. The software is the most important component of the iPhone
c. The iPhone is made in other countries because the labor force is cheap and
abundant.
- Why assemble in China
a. It’s cheaper labor, and has more manpower
b. 50.4 million in 2021
c. The public relation fiasco that they learned was that if they use another company
to oversee the assembly, they avoid a scandal like other companies in the past.
d. The labor laws in China benefit Apple because the workday is 12 hours instead of
8 hours
- Why are Apple products so expensive?
a. Apple Tax- slang term describing the extra money a person pays when buying any
Apple product. The apple tax is not a real tax, it merely refers to the higher cost of
most Apple products
b. Since it’s a publicly traded company, it is expected to grow for its shareholders,
which raises the price to combat declining sales.