USA financial systems are well designed to serve the economic interests of large number of people residing all around the nation. The main objective of the USA financial systems is to provide a stable monetary system. This can be done by maintaining an optimum level of growth in the economy. There are various tools that are implemented to achieve this purpose. To provide a brief insight into the system lets analyze some of the most commonly implemented tools. The role of banks in USA financial systems is very important.
The main aim of the banks is to maintain a particular amount of capital and liquid cash so that they can meet with the requirements of their customers. In order to achieve this, the rate of interest, amount of deposits and other demands of customers are always under consideration. With the help of banks, the financial market can easily be monitored and analyzed.
Banks have the prerogative of levying interest on money that they have given to customers. This is a necessary function performed by the banks. Interest is one of the most basic requisites of any financial system. Without it, there can never be any financial system. Any form of financial transaction will always require the presence of interest. Another function performed by the banks is that of making credit history. Credit history is basically used to evaluate the past monetary performance of a particular customer. Any financial institution is capable of generating and creating credit history.
The USA financial system also has its fair share of derivatives. Derivatives refer to the financial products that are based on the prices and values of certain underlying commodities or currencies. Different types of derivatives are offered by different financial institutions. These financial products form an important aspect of all the different operations that are involved in the USA financial system.
Stock markets and the stock exchange is another facet of the USA financial system. In this case, different stocks are exchanged for a particular price. It is through the stock markets that businesses get listed for sale. International trade is also another important aspect of the USA financial system. Most of the international trade deals are primarily based on the commodity market. This is one reason why the USA is considered the leading exporter of oil in the whole world. All these aspects of the USA financial system are interrelated and interconnected.
The other major financial systems of the world are also affected by the activities of the banking systems of the USA. For example, if there is any problem in the UK financial system, the effect on the price of the commodities in the USA is unimaginable. Therefore, it can be said that the USA financial system is the leading financial system in the world today. Its impact on the world economy is far-reaching and powerful.
Federal Reserve Bank
Apart from the above-mentioned systems, there are many other financial institutions that have their own importance. For example, the Federal Reserve Banks play an important role in stabilizing the interest rates of the country. At the same time, various government organizations like the FHA, VA, and USDA guarantee the security of the nation. All these arrangements help in stabilizing the economy of the country. In addition, the huge amount of money pumped in by the central government to these institutions helps them immensely.
There are many other small but important financial institutions too. For example, commercial banks play a significant role in the overall economic stability of the country. They lend money to businesses and other individuals for establishing new businesses and also provide credit facilities. Credit facilities include personal loans, business loans, etc. Thus, small banks are very important for the smooth functioning of the economy. All these arrangements form an important part of the USA financial system. However, since there are many changes in the laws of the federal government every now and then, many things have to change as well. The need to update these systems is therefore more than ever.
USA Financial System
In fact, the government is constantly looking out for ways to make the USA financial system more efficient and less cumbersome. One way of doing this is by making the laws more stable. Another way is through making the laws more uniform so that each financial institution is bound to follow the same rules irrespective of its country of origin. Hence, we can say that the USA financial system has enjoyed steady growth over the years and it continues to do so.