Force of The World’s Economy
America’s financial market is the largest in the world, our dollar stands as a bench mark that all other currencies can be compared to. The economic draw that America has gathered over the years has created an economy so pivotal to the world economy that investors from all over depend on knowing every move that the Fed makes. This responsibility weighs heavily and effects nearly every person dependent on today’s economic standings.
The financial market directly effects the flow of saving and investments in corporations. This facilitates in production of goods and services and in turn helps generate more capital. If investments are high, companies can take more risks and expand more, expanding the economy as a whole. The motions and actions in financial markets signal to other what to expect, this helps direct the flow of all other aspects and participants in the national economy. (Econ, 2005) The financial market also plays a big role in credit and loans. For a lot of businesses the ability to keep running, even when in good standing, is dependent on access to loans. If banks are seeing drops in the market as a whole they become reluctant to hand out loans, which can make it harder for businesses to keep running without exceptional credit. This is especially damaging to small businesses and even major corporations who have had recent failures or debt increases. (Best Invoice Factoring, 2015) This can also effect the individual as a company struggling to acquire funds will often turn to cutting spending. This can often lead to lower benefits, lower hire rates and lower wages. Negative side effects of decreases in the financial market can ...
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... rates increasing smaller markets are more pressured to keep up making it harder for them to attract investors. Rising interest rates can effect dollar denominated debt in smaller markets. Countries like Turkey, Brazil and South Africa finance their debts through dollar denominated debt. If the US dollar appreciates and the interest rate goes up, the exchange rate will increase to a point where this debt become unmanageable. (Nath, 2015)
America’s financial market’s importance is clear and there is no easy solutions when so many variables are involved. The international markets and the global economy need to be able to rely on and predict where the Fed will go and its subsequent effects. A lot goes into the decisions made by the Fed and its board, and the success of those decisions can change a lot more then how well the banks or stock exchanges are doing.
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