Complexities of the U.S. Financial System



Complexities of the U.S. Financial System

The Impact of U.S financial system on business, economy and individuals

The financial markets of U.S play a vital role in enhancing, and contributing to the health of business, economy, and individuals. If sudden dip is observed in the financial markets the individuals, businesses, and economy respond immediately to reduce the threat of loss. The main function of the financial market is to raise funds in the capital market, mitigate risk in the derivative markets, transferring of liquidity in the money markets, helps in international trade by integrating financial markets, and price discovery.

When the financial markets are in crisis the interest rates go up, access to credit is reduced. The main reason is that banks fear that the risk of default prevails in the atmosphere. This is why banks limit the lending of money and is more interested in recovering their lent amounts. Due to the increase in interest rates, businesses that are dependent on credit to sustain their daily operation now find it difficult to get credit than usual. When the financial markets are in mayhem, all sorts of businesses usually go bankrupt. The business that survives and operates at the time of the financial crisis increases the cost of goods and services to meet the cost of their operations.

To reduce the cost of operation and avoid failure, people are laid off by the business. As unemployment increases, people stop spending money, and fewer investments are seen in the businesses to run the business. This not only affects the businesses but also the economy in large.

2. Role of Federal Reserve, Board and Chairman

The US Federal Reserve is the central bank of US, it was founded in 1913. It was established to provide the nation with a more ...