Is This the End of Globalization?

Investors are less intent on pursuing cross-border profits, investing in overseas endeavors. A McKinsey Global Institute report measured money in the global financial system before and after the 2007-2008 financial crisis: In 2007, $11.8 trillion in investments and loans crossed borders; the figure for 2012 is $5 trillion. “McKinsey hedges the report by saying that some of the capital removed from the system was part of a necessary global correction,” reports David Francis for the Fiscal Times. “But it also warns that global growth would be extremely difficult without more money in the system.” The report presents two options, both posing challenges: Countries could become more isolationist, focusing on domestic development; this could stabilize markets, but sacrifice international growth. Or, financial institutions and policymakers could agree on global regulations that reduce risk in cross-border transactions. “But creating binding global financial regulations, and appointing a global authority to enforce them, would be extremely difficult,” Francis concludes. “Think of this authority like the International Monetary Fund with teeth, a kind of global S.E.C.” – YaleGlobal