This book is dedicated to Jim Ragsdale. I would also like to
thank everyone who helped along the way-in particular, Janos
Farago in Geneva and Emanuele Pignatelli in Zurich (without
whose help this book would really not have been possible) and
Chuck Painter, who first inspired me to write this book. A special
thanks to all those who helped with ideas and suggestions,
making this book as "user friendly" as possible: Shawn Engelberg
of Lake Oswego, Oregon; Del Franz of New York City;
Otto Bohlman of New Haven, Connecticut; Paul Barichman of
Athens, Georgia; Rodrigo FiBes of Rio de Janeiro; Joanna Hurley
of Albuquerque; Gary Epping of Portland, Oregon; Elemer
Hantos of Nyon, Switzerland; Robert Malley of Washington,
D.C.; Pedro and Marisa Moreira Salles of SBo Paulo; Terry
Ragsdale of New York; Jean-Marc and Virginia Pilpoul of Paris;
Sebastian Velasco of Madrid; Alex Neuman of Zurich; Rich
Rimer of Amsterdam; Enrique Schmid of San Pedro Sula; Benoit
Demeulemeester of Zurich; Anders Thomsen of Copenhagen;
Chris Elliott of Geneva; Tom Header of New York; Persio Arida
of SBo Paulo; and Michael Piore at MIT in Cambridge, Massachusetts.
I would also like to thank my editors at Vintage
Books-Marty Asher, for his vision and confidence in developing
and publishing this book as a Vintage Original, and Edward
Kastenmeier, for his tireless efforts in the preparation of this
new edition. Finally, a special thanks to all the readers who
contacted me in Zurich (Internet: 100561.3462 @compuserve.
com) with comments and suggestions, making this new
edition an even better guide to the expanding global economy.
CONTENTS
1. What Is the World Economy? 3
2. How Is Wealth Determined Around the World? 4
3. What Is Macroeconomics? 6
4. How Does International Trade Function? 8
5. What Are Trade Surpluses and Deficits? 10
6. How Does Foreign Ownership Affect a Country's Economy? 12
7. What Is Money? 13
8. What Are the World's Major Currencies? 16
9. What Are Freely Floating Currencies? 18
10. What Are Exchange Rates? 20
11. What Is GNP? 22
12. What Is Inflation? 24
13. How Can the World's Economies Be Compared? 26
14. What Is Money Supply? 27
15. What Is a Central Bank? 29
16. How Do Central Banks Regulate an Economy? 32
17. How Are Interest Rates Used to control an Economy? 35
18. What Is Free Trade? 36
19. What Are Quotas, Tariffs, and subsidies? 38
20. How Do Budget Deficits Affect Trade Deficits? 40
21. Why Are Companies Referred to as Ltd., Inc., Gmbh, or S.A.? 42
lxii CONTENTS
22. What Is Equity? 44
23. What Is a Balance Sheet? 45
24. What Is a Profit and Loss Statement? 47
25. What Is Net Worth? 49
26. How Are Companies Compared Internationally? 51
27. What Is a Leveraged Buyout? 52
28. How Do Companies in the Global Economy Transcend
National Boundaries? 54
29. How Are International Investments Compared? 57
30. What Are the Risks of International Investing? 58
31. What Is a Stock Index? 61
32. How Do Investors Buy Foreign Shares? 62
33. What Is an Equity Fund? 64
34. What Is Bankruptcy? 66
35. What Is a Capital Market? 67
36. What Is a Bond? 69
37. How Are Bonds Traded? 71
38. What Are Eurocurrencies and Eurobonds? 73
39. How Are Ratings Used to Evaluate Investments? 75
40. How Is Gold Used as an International Investment? 76
41. What Are Derivatives? 78
42. What Is an Option? 80
43. What Are Puts and Calls? 83
44. What Is a Currency Option? 84
45. What Is a Warrant? 86
46. Who Invests in the Global Marketplace? 88
47. What Is Hot Money? 90
48. How Do Investors and Businesses Use Information Technology
to Access the Global Economy? 94
CONTENTS xiii
49. What Are the Forces Behind European Economic Unity? 97
50. What Is the European Union? 99
51. How Do Communist Countries Participate in the
World Economy? 101
52. How Did the Socialist Countries of the Soviet Bloc Make
the Transition to Capitalism? 104
53. What Is the Pacific Rim Economy? 106
54. What Is Japan Inc.? 108
55. What Is NAFTA? 110
56. What Are Free-Trade Megazones? 112
5% What Is the Third World? 116
58. What Are the Roots of Third World Poverty? 118
59. What Are the Origins of the Third World's Debt? 119
60. What Is Hyperinflation? 121
61. What Are Economic Austerity Plans? 123
62. What Can Be Done to Promote Third World Development? 125
63. How Is Global Economic Cooperation Encouraged? 127
64. What Is the World Trade Organization? 128
65. What Are Regional Development Banks? 130
66. What Are the IMF and the World Bank? 132
67. How Is Corruption Part of the World Economy? 134
68. What Is Money Laundering? 135
69. How Does a Swiss Bank Account Work? 137
70. What Is a Tax Haven? 139
71. How Do International Criminals Escape Prosecution? 140
72. What Are Black Markets? 142
73. How Is Slavery Part of the World Economy? 143
74. How Is the Environment Affected by the World Economy? 146
xiv CONTENTS
75. What Are Pollution Rights? 148
76. What Is a Debt-For-Nature Swap? 150
77. How Can Economic Sanctions and Incentives Be Used
to Protect the Environment? 152
GLOSSARY 155
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