Mrkts II

Over the yrs the complexity of the products traded in stock markets and OTC(over the counter)markets has increased. This trend has forced many co's in the business to hire people of various backgrounds: from nuclear scientists to plain number crunchers. many Wall street co's hav supercomputers which many research institutes would dream to hav. why are stock exchanges required, is it just a medium where the rich get richer and the poor remain so.....

It is essential for general public to understand the role of markets in allocation of money. Financial markets are here to ensure savings get adequant returns and capital is raised at reasonable costs. we'll see some of the main uses of markets.

• Raising Capital: brings together both savers and agents requiring resources.
• Resource allocation: markets ensure that project with highest returns or in other words efficient projects gets the resources.
• Risk reduction: investor can diversify their portfolio to reduce high exposures to particular sectors or stock.
• Commercial transaction: markets ensure adequate liquidity so that purchases and sales can be made without much difference in prices.

Well the benefit is derived by the person who has the knack of utilizing it. the U.S is running a 4.5% deficit with the world i.e the U.S is borrowing roughly $2billion every day from other countries. why are other countries so willing to lend? here are some of the possible reason..

• many asian countries buy $ to keep their currencies devalued so that they can boost their export to the $12 trillion U.S economy
• asian countries hold huge reserves as an insurance against a possibl run on their currencies - remember the 1998 financial crises
• though the U.S is a capital rich nation the margianl return on additional capital invested is higher than many large economies like Germany, Japan....
• the asian economies are just not spendin the money. the U.S is borrowing only bcoz of excess savings by othr economies.