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Sterling has today picked up sharply after weeks and weeks of pressure and selling by investors. This comes just ahead of the MPC meeting to decide their next move on UK base rates and until just a...
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Sunday 20th July 2008
To many people the stock market seems to be a play area for rich individuals and institutions and it does not even register with the majority of the UK population. So what role does the stock market play and is it really needed?
Only those who have no dealings with or do not understand the stock market would even ask that question. The market is vital to both the business sector in the UK and the government because the FTSE100 index and the like only scratch the surface of the stock market and what it really has to offer to UK Plc.
Aside from the fact that even in times of trouble, such as the period we are going through at the moment, the markets can be a great source of commercial finance, the government regularly use the Treasury markets to raise funding. Those who follow government spending will be well aware that the authorities are borrowing record amounts at the moment with £25 billion already taken out in 2008 alone. This funding is provided by institutions and investors who purchase what are known as GILTS, investments which are backed by the government.
In exchange for funds, investors will acquire an investment which will be redeemed at some point in the future but will pay the holder a rate of interest in the meantime. As the investment is backed by the government there is literally no chance of it not being repaid and it can be bought and sold up until the redemption date. The investor gets a rock solid investment earning income and the government are able to raise funding in a very short space of time.
Without the stock market there would be no government finances and there would be no economy, it really is that important. |
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