The Money Market Essay

The Money Market

The article by Timothy Q. Cook and Robert K. LaRoche is an explanation of what the money market is, how it works and the role each sector plays in the market. Generally speaking, the money market consists of a network of financial institutions which are either interested in borrowing or lending money for a short period of time. Thus, the money market serves as an avenue for investors who are interested in staking their money for a short period of time to meet financial institutions or companies that need short-term cash.

In America, the money market has been an integral part of the nation’s economy. Compared to other countries, the money market in America is not only faster but more efficient. It serves as a backbone of many banks and financial institutions to raise liquid cash for their projects and to run their operations. This is done by the issuing of promissory note, bonds and treasuries. The Federal Reserve is also actively involved in the money market as they oversee the transactions that occur in market.

The money market is different from the stock market in that it is a debt that has short-term period of maturity. Apart from this, it is less risky when compared to the stock market. Unlike the stock market where an investor can record a high percentage of gain or loss, the money market is less risky, although the percentage of profit/loss margin that an investor stands to gain/lose is lower.

The economic meltdown in America as made several investors think before investing their money in the stock exchange. For many people, it is better to hold o to your liquid cash rather than think of investing your money with the current trend in the financial market. However, i believe that given the nature of the money market, it is still wiser to invest in the money market than the stock market as opposed to what many investors think, i believe that investing might not be a bad idea right now. However, with the current trend, i believe the money market is a better choice when it comes to investment.

Reference:

LaRoche, R & Cook (1993) The Money Market