English: growth rate of the money supply m3 in the Euro area (Photo credit: Wikipedia)
Secret to Wall Street Riches Revealed (Photo credit: C. K. Hartman)
Two sides of a duit, a coin minted in 1735 by the VOC. (Photo credit: Wikipedia)
International Currency Money for Forex Trading (Photo credit: epSos.de)
Personal Finance (Photo credit: 401(K) 2013)
Shanghai Stock Exchange (Photo credit: Wikipedia)
OUR GOOD EARTH – KEEP IT OURS. BUY WAR BONDS AND MAKE EVERY MARKET DAY BOND DAY. – NARA – 515145 (Photo credit: Wikipedia)
English: Components in the US Money supply based on Federal Reserve historical data (Photo credit: Wikipedia)
NYC – FiDi: American Stock Exchange Building (Photo credit: wallyg)
New Zealand money supply 1988-2008 (Photo credit: Wikipedia)
English: The Euro money supply from September 1998 through October 2007. (Photo credit: Wikipedia)
U.S. M3 money supply as a proportion of gross domestic product. (Photo credit: Wikipedia)
New York Stock Exchange on Wall Street in New York, New York, United States. Español: Bolsa de Nueva York en Wall Street en Nueva York, Nueva York, en los Estados Unidos. (Photo credit: Wikipedia)
Individual Consumer Loans at All Commercial Banks, 1990–2008 (Photo credit: Wikipedia)
An international
Japanese money supply (April 1998 – April 2008) (Photo credit: Wikipedia)
capital market is a system that allocates financial resources in the form of debt and equity according to their most efficient uses. Its main purpose is to provide a mechanism to borrow or invest money efficiently.
Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets serve the purpose of channeling the wealth of savers to those who can deploy the funds in long-term investments to make them more productive. Individuals and institutions borrow money from lenders; intermediaries exist to facilitate financial exchanges. Governments and companies participate in this process.
Financial regulators oversee financial markets in their respective jurisdictions. The U.S. Securities and Exchange Commission (SEC), oversees the capital markets to protect investors against fraud.
Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)
Modern capital markets are generally hosted on computer-based electronic trading systems. Entities that host the systems include: stock exchanges, investment banks, and government agencies. The systems are generally hosted in world financial centers like London, New York, Tokyo and Hong Kong.
There are also Offshore Financial Centers which include a country or territory where the “financial sector features few regulations and low taxes. An offshore financial center (OFC), though not precisely defined, is usually a small, low-tax jurisdiction specializing in providing corporate and commercial services to non-resident offshore companies, and for the investment of offshore funds. These areas tend to have the following characteristics:
(1) economically and politically stable;
(2) advanced telecommunications;
(3) offer large amounts of funding in many currencies;
(4) provide a less costly source of financing.
- A bond from the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins. (Photo credit: Wikipedia)
Debt generally involves loans; a borrower repays borrowed amount (the principal) plus interest. Company debt normally takes the form of bonds—debt instruments specifying the timing of principal and interest payments.”
A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt. This debt has a repayment schedule that depends on the terms of the bond. Interest is usually payable at fixed intervals (semiannual, annual, monthly).
The holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure.
The bond holder is the lender who can force the borrower into bankruptcy if payment is not made on a timely basis. Bonds can be issued by private-sector companies and by municipal, regional, and national governments.
The International Bond Market “consists of all bonds sold by issuing companies, governments, and other organizations outside their own countries. Buyers include medium- to large-size banks, pension funds, mutual funds, and governments.” There are many types of International Bonds. Eurobonds are issued outside the country in whose currency it is denominated; for example, issued in Venezuela in U.S. dollars, and sold in Britain, France, and Germany. A Foreign Bond is sold outside the borrower’s country and denominated in currency of country in which it is sold; for example, a yen-denominated bond issued by German carmaker BMW in Japan’s bond market.
Conversely, Equity is part ownership of a company. “The equity holder participates with other part owners in the company’s financial gains and losses.” Equity normally takes the form of stock; investors buy shares of ownership in a company’s assets that give shareholders a claim on the company’s future cash flows. Investors anticipate income from dividends and capital gains, as the value of the stock rises.
Typically, equity holders receive voting rights; they can vote on candidates for the board of directors on a proxy statement. Oftentimes, they can vote on major transactions. When the investment is in infant companies or start-up, it is called venture capital which is generally regarded as a higher risk investment.
Shareholders want a return on their investment in the form of dividends or by increases in the value of their shares. They may also suffer losses through decreases in the value of their shares. Dividend payments are not guaranteed. The company’s board of directors makes dividend decisions based upon the company’s financial performance.
The International Equity Market consists of all stocks bought and sold outside the issuer’s home country. Companies and governments issue equity; buyers include other companies, banks, mutual funds, pension funds, and individuals. The spread of Privatization generates billions of dollars of new equity into stock markets around the world. Increased privatization in Europe is expanding worldwide equity. European Union integration has made investors willing to invest in stocks from other European nations.
- Finance (Photo credit: Tax Credits)
The International Capital Market is a “network of individuals, companies, financial institutions, and governments that invest and borrow across national boundaries.” Large international banks gather excess cash of investors and savers around the world and then channel it to global borrowers. This expands the Money Supply for Borrowers. Companies that are unable to obtain funds from investors in the domestic market seek financing in the international capital market. This reduces the cost of borrowing by expanding the money supply. Excess funds create a “buyer’s market” and interest rates are lowered.
The international capital market expands lending opportunities. Investors reduce portfolio risk by spreading their money over many debt and equity instruments. Investing in international securities benefits investors because some economies are growing while others are declining. There are many forces that are expanding the International Capital Market:
1. Information Technology reduces the amount of time and money needed to communicate globally.
2. Deregulation increases competition, lowers cost of financial transactions, and opens many national markets to global investing and borrowing.
Money-supply (Photo credit: Wikipedia)
Interbank interest rates are interest rates that the world’s largest banks charge one another for loans. London Interbank Offer Rate (LIBOR) is the interest rate charged by London banks to other large banks borrowing Eurocurrency. London Interbank Bid Rate (LIBID) is the interest rate offered by London banks to large investors for Eurocurrency deposits. Some countries have policies for restricting currencies because they want to preserve the nation’s hard currencies to repay debts owed to other nations. They also hope to preserve hard currencies to pay for imports and finance trade deficits and want to protect a currency from speculators. These currency policies may include the following restrictions:
1. Nation’s central bank must perform all foreign exchange transactions.
2. Government controls amount of foreign currency leaving the country by requiring importers to obtain import licenses.
3. Implement systems of multiple exchange rates that specify higher rates on the imports of certain goods or on the imports from certain nations.
4. Issue import deposit requirements that require businesses to deposit certain percentages of their foreign exchange holdings in special accounts before being granted import licenses.
5. Issue quantity restrictions that limit the amount of foreign currency that individuals can take out of the country when traveling abroad.
Countertrade involves the exchange of goods or services between two parties without the use of money. International companies can circumvent currency convertibility restrictions and still conduct business.
English: Changes in US Money supply based on Federal Reserve historical data. Source code is in File:Components of US Money supply.svg (Photo credit: Wikipedia)
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