Functions Of Global Financial System

Decent Essays
Since the beginning of creation, man has engaged in financial transactions. In today’s society, financial transactions frequently occur on an international level within the global financial system. The global financial system (GFS) is the worldwide structure of legal agreements, institutions, and relators that together facilitate international needs for money and capital markets (Saunders & Millon-Cornett, 2003). The main players are global institutions, national agencies along with government agencies and private institutions acting on the global scale (James & Patomaki, 2007). The GFS is imperative to increase our standard of living, generate new jobs, and to build our savings in order to meet tomorrow’s financial needs.
Nature or Role
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Bonds, stocks, and other financial claims which are sold in the money and capital markets provide an outlet which can be used by companies or businesses who obtain loans in order the increase the production of goods and services. Productivity will rise. This in turn will create an increase in the overall growth of the economy.
Wealth Function
Wealth is defined as the accumulated savings built up over time. In mathematics, wealth is defined as the sum of the values of all individual assets which are held at any particular moment in time. Various individuals and businesses might store their wealth in tangible objects such as automobiles. Unfortunately, tangible objects will lose their value over time. Investments or assets have the chance of increasing in value over time.
Liquidity Function
For wealth maintained in financial instruments, the GFS can convert these instruments into cash with very limited risk. The world’s financial markets provide immediate spendable cash for savers who hold financial instruments and are in need of money. In developed countries like the United States, money comprises of mainly currency and deposits held in banks, credit unions, and other depository institutions. In lesser developed countries like Africa, simple bartering or the exchanging of one good or service for another, provides many of the same services that money provides in a developed

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