It seems obvious that an investor would want to invest in the asset class that offers the least amount of risk. But the sharp fall in the Dow Jones last week wasn’t the worst globally.
What is a financial system?
Well, it can be defined at a global, regional or firm specific level.
But generally, it is a system that covers financial transactions and the exchange of currency between investors, lenders and borrowers. In short, a system that tracks financial activity.
The systems are operated by financial institutions and are strictly regulated as they directly influence financial markets. Market stability through such regulation plays a crucial role in the protection of consumers’ financial assets.
A firm’s financial system is based on a set of implemented procedures that track the financial activities of the company, including accounting measures, revenue and expense schedules, wages and balance sheet verification.
Global Financial System
The global financial system is essentially a broader regional system that encompasses all financial institutions, borrowers and lenders within the worldwide economy. This includes the International Monetary Fund, central banks, World Bank and major banks.
All systems are made of intricate and complex models and compiled with financial services, institutions and markets that link depositors with investors.
Another component of financial systems are markets that trade in commodities, securities and other products that are traded according to general supply and demand.
Financial markets include primary markets, which provide venues for buyers and sellers to exchange bonds, and secondary markets, which provide a venue for investors and traders to purchase instruments that have been bought previously.
Read on below for the latest news regarding financial systems, both domestically and internationally.
Those who follow the market are aware US 10-year bond yields have been rising steadily since July 2016. But what many people don’t know is that there is a hidden debt bomb that could blow…
The ‘official’ spin paints a picture of an economy enjoying relatively good health, when the reality is quite the opposite. We’re bloated with debt. That’s the truth behind our economic ‘successes’.
We didn’t really get over the 2008 financial crisis. Instead, central banks around the world decreased interest rates and pumped in a lot of money to keep the economy going. This has fuelled the recovery.
The Fed is at least trying to build a buffer for the coming deflationary crisis…but Japan and Europe have hardly moved from zero. Neither of them have anything to cut next time.
Investors are seeing troubled waters ahead. They may be blaming the bond market for the latest drops, but the real fear here is inflation.
As usual in a booming market, investors lose peripheral vision. The focus is solely on one thing and one thing only…the offer of higher returns.
At time of writing, the ASX is currently down 2.2%. This is a major drop and has the ASX trading below 6000 for the first time since early June.
A McKinsey study shows that emerging markets have taken on $57 trillion in additional debt through 2014, with more to follow.
These inflated assets all have one thing in common…they’re united by debt. In due course, market forces will succeed in correcting the excesses of the past decade.
To give people the opportunity to borrow money and rebuild their lives, interest rates have remained ultra-low. In Australia, the Reserve Bank has left rates at 1.5% for 26 consecutive months.
Without the ability of working households to borrow (significantly) more and for retired households to spend more, the Ponzi scheme collapses. The real lie we’ve been living will be exposed with a credit crisis of…
The property market is getting hit by a triple whammy: lowering property prices, tightening credit and increasing rates. Can property prices fall 50%? The short answer is yes.
It seems that the RBA’s decision to keep interest rates at historically low levels came and went with barely a murmur. The mainstream media is currently avoiding discussion of the implications of this policy for…