The capital market and its features

The era of subsistence farming has long ended, and the economy quickly overstepped the borders of one country, because trade between different countries brings quite tangible benefits to all participants. Economic relations between the countries arose a long time ago, while in Ancient Egypt, Greece, Rome there was an active trade in precious metals and handicraft products. The Middle Ages were marked by rich trade in Venice, Italy and Russian Novgorod, and although its volumes were relatively small, it played an important role in the development of the country. To date, each of the countries of the world begins to successfully master the capital market and its features, which is why the formation of the world economic market is taking place.

The world market is a set of interacting and interconnected national markets of the most diverse states participating in international trade. A country that wants to realize its potential must certainly have at its disposal a method that can attract savings, as well as increase them. In a market economy, these responsibilities are borne by the capital market, which is a diverse structure. It consists of the stock market, the real estate market and the borrowed funds market. The capital market, unlike the stock market, has at its disposal a financial instrument of the stock market, as well as borrowed funds with a sufficiently long maturity.

Insurance companies, banks, funds, investment companies and other financial institutions play a significant role in this market. Investors, who are represented by owners of large and small companies, are engaged in the selection of the most profitable projects, since it is from such investments that their future welfare depends. If the incomes do not just compensate the expenses for the enterprise, but also bring additional profit, then the result of investment receives a higher rating than the funds spent on it. Thus, not only investors get profits, but also the country.

Investors can not always determine the profitability of the project, and therefore often the enterprises chosen by them are unprofitable. However, to refuse such projects is also inexpedient, because then many new ideas will remain unclaimed, and the most daring projects would simply be unworkable. Erroneous investments represent the price that society is willing to pay for the introduction of completely new technologies and innovations. The most important thing is the timely cessation of unprofitable projects, which is exactly what the capital market serves. Non-state investors will not waste their time and money to support a loss-making project.

In the event that investment resources come under the control of the government and are not controlled by the market, the game takes a completely different turn. The expected return on investment is replaced by a political underpinning, and investment resources are channeled into projects that are profitable for political associations. Many Western European countries are very profitable to use credit limits of commercial banks to address global issues of monetary policy. In Italy, in order to obtain a loan for a large amount, a central bank's permission is needed, but in the pursuit of profit, many banking structures often exceed these limits. In some countries, severe sanctions are provided for such violations, which is why the international capital market is still afloat.

The rapidly developing capital market is one of the most important factors in international economic relations, but at the same time is a fairly large stumbling block.