Markets are interconnected, the problem in a market in the different market sources. This finding is a starting point for macroeconomics. To limit their market to be explored, economists have traditionally lumped together or go to only four total market in the modern economy the vast number: the market for goods and services, financial assets, money balances and resources.
Check these four together is the central macro-economic market. Macro-economists of the two core issues, because they check each: "This is a source of market instability, may appear as inflation or recession," and. "Is this economic adjustment in the overall process of market adjustment problem "
The reading group has started looking through the aggregate market in the financial markets to explore. We first introduce the basic concepts of financial markets, continue to review the role of speculators in the financial markets, introduces the concept of efficient markets, and completed in the foreign exchange market, explain the floating and fixed exchange rates between the differences.
In one part of the rapidly changing economic transmitted to other parts of the financial markets. The transmission capacity of the financial markets, is to highlight the foreign exchange market, where we show that aims to protect the economic costs in one part of the work can work in other parts of the tariff. Not limited to such transmissions, or tariffs on the foreign exchange market, all financial markets sent.
From the microscopic point of view, the main purpose of the financial markets is to provide savings allocated to the most productive uses. A well-functioning financial sector to increase economic growth. If the economy is not assigned to the most productive economic use, it will become more and more slowly than it can grow. As we see in financial markets, from the macroeconomic point of view, this reading group in the largely ignored the financial markets importance in the allocation of funds.
Financial institution
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Private (equity) or public (government owned) organizations, broadly speaking, as between a savings and capital (supplier and consumer of funds) borrowing channel behavior. Two main types of financial institutions (including the line has become increasingly blurred) are first is deposit banks and credit unions to pay interest on deposits, loan interest, second is non-deposit insurance companies and mutual funds (unit trusts) is responsible for collecting Their policies or sale of shares (units) of public funds, and provide regular benefits in the form of expenditures and profits.
Money and capital market
The money market is the global financial market borrowing and loans of financial markets. This Provide short-term liquidity fund the global financial system. Money market is a Capital market sectors, such as short-term Treasury debt, Commercial paper and bank acceptances are bought and sold.
Credit markets, including currency or monetary financial institutions and dealers who
Hope that both the borrowing. It was lending, lending a very short period of time,
Usually up to 13 months. Short-term money market financial instruments traded
Commonly known as "paper." In contrast, long-term funding for the capital markets,
This is provided by the bonds and stocks.
Money is the medium of exchange, to ensure a successful exchange as the tender that is always acceptable. Money is necessary because the human must communicate to live in peace and flourish. Important is how found the idea of money? Look around you.
This involves the concept or idea of making money. However, an idea, therefore, does not exist as a physical entity. Money must be a physical entity. Whether it is "electronic" money today banknotes and coins, nor is it as a cash flow and has no official or legal connection and gold and silver. However, once they do, most people think they still do. As long as this situation continues, the function of the modern monetary system.
Now, a person how to learn how to choose what is to be used as currency? Simple, a look
In most of the flow of good, well this is the highest in demand, has begun a good
Be accepted, but not in it to end, but as a means to an end. Money is a good thing
People do not want to consumption, but to be used for further communication easier. Human people living together more than two years years. Money in its modern form -
Constant weight and denomination of coins - into the use of less than three thousand years ago. It took a long time to find the most conducive to the purpose of physical interest medium of exchange.
Direct exchange of money, or exchange of use, is this - my goods or services
Your goods or services. The question is, maybe you can offer me anything, but you
May not want me in the exchange offer. Since there is no "in the" exchange, and no
Transaction. Indirect exchange occurs, the party has a "medium" that is always
Acceptable, rather than what it is, but because you can use it. If you give me money, I
Will accept it, because I know I can change what I want when I need it. Money is defined as any asset, is acceptable as a medium of exchange payment goods and services.
Capital markets including the stock market, bond market, as well as major markets.
Organized capital market monitoring of the government securities trading; new the problem is the financial regulatory and monitoring through participation Bank.
This market brings together all the providers and users of funds. Financial products, such as stocks, bonds, mutual funds, insurance funds may make the transfer. Financial intermediaries such as banks, brokerage firms and insurance companies for capital transfers.
There are two types of securities transactions in the capital markets: debt and equity.
Allow investors to buy shares part of the shares in the company and become owner. When investors buy bonds, they are essentially lending money to companies or
government-issued bonds, the creditors of the issuer.
A broad term covering the arrangements for financial investment, buy and sell shares, and loans to purchase, the market may not necessarily actually exist, though not usually buy and sell stocks, for example through Stock Exchange is located in the City of London.
Long-term financial instruments on the secondary market, trading in financial instruments capital markets including stocks, issued by the Australian Government and state bonds government, business and loans from financial institutions. Capital market is the vast in the long-term investment products such as stocks and bonds traded market
Sale. It includes all of the people and organizations support this process.
The local capital market debt and assets, including the medium and long term
Long-term securities, money market, short-term investments are different. Market
Long-term financial instruments are fair and credit market securities with original
More than 1 year maturity. Credit market securities, including bonds and bank loans.
And improve risk sharing and insurance funds and the relevant agencies, including banking, insurance market, bond market and stock market.
Diagram of the capital formation process
1. Direct Transfer securities (stock or bonds)
Business Dollars savers
2. Indirect Transfers through Investment Bankers
Business investment banking houses savers
3. Indirect Transfers through a financial Intermediary
Business's securities Intermediary's securities
Business Dollars financial intermediary Dollars
Transfers of capital between savers and those who need capital take place in the three different ways diagram of the capital formation process .
First is direct transfer of money and securities, as shown in the top section , occur when a business sells its stocks or bonds directly to savers, without going through any type of financial institution . The business delivers its securities to saver , who in turn give the firm the money it needs .
Second is as shown in the middle section , transfers may also go through an investment banking house such as Merrill Lynch , which underwrites the issue .An underwriter serves as a middleman and facilitates the issuance of securities . The company sells its stocks or bonds to the investment bank, which in turn sells these same securities to savers. The businesses' securities and the savers' money merely "pass through" the investment banking house. However , the investment bank does buy and hold the securities for a period of time , so it is taking a risk -it may not be able to resell them to savers for as much as it paid . Because new securities are involved and the corporation receives the proceeds of the sale , this is a primary market transaction .
Third is transfer can also be made through a financial intermediary such as a bank or mutual fund . Here the intermediary obtains funds from savers in exchange for its own securities . The intermediary then uses this money to purchase and then hold business' securities . For example , a saver might give dollars to a bank , receiving from it a certificate of deposit , and then the bank might lend the money to a small business in the form of a mortgage loan .Thus ,intermediaries literally create new forms of capital- in this case, certificate of deposit , which are both safer and more liquid than mortgages and thus are better securities for most savers to hold . The existence of intermediaries greatly increases the efficiency of money and capital markets .
In our example , we assume that the entity needing capital is a business , and specifically a corporation ,but it is easy to visualize the demander of capital as a home purchaser , a government unit, and so on .
Direct transfers of funds from savers to businesses are possible and do occur on occasion , but it is generally more efficient for a business to enlist the services of an investment banking house such as Merrill Lynch , Salomon Smith Barney, Morgan Stanley Dean Witter , or Goldman Sachs . Such organization direct transfers help corporation design securities with features that are currently attractive to investors , indirect transfers through investment bankers then buy these securities from the corporation , and indirect transfers through a financial intermediary resell them to savers . Although the securities are sold twice , this process is really one primary market transaction , with the investment banker acting as a facilitator to help transfer capital from savers to business.
The financial intermediaries shown in the third section of diagram of the capital formation process do more than simply transfer money and securities between firms and savers is they literally create new financial products . Since the intermediaries are generally large , they gain economies of scare in analyzing the creditworthiness of potential borrowers , in processing and collecting loans , and in pooling risks and thus helping individual savers diversify , that is , "not putting all their financial eggs in one basket." Further , a system of specialized intermediaries can enable savings to do more than just draw interest . For example , individuals can put money into bank and get both interest income and a convenient way of making payment ( checking ) , or put money into life insurance companies and get both interest income and protection for their beneficiaries.
