The era of subsistence farms is long over, and the economy quickly went beyond the borders of one country, because trade between different countries brings quite tangible benefits to all participants. Economic relations between the countries arose a long time ago, even in Ancient Egypt, Greece, Rome, there was an active trade in precious metals and craft products. The Middle Ages were marked by rich trade in Venice, Italy and Russian Novgorod, and although its volumes were relatively small, it played an important role in the development of the country. Today, each country in the world begins to successfully master the capital market and its features, which is why the formation of the global economic market is taking place.
The world market is a set of interacting and interconnected national markets of various countries involved in international trade. A country that wants to realize its potential must certainly have at its disposal a method that can attract savings, as well as increase them. In a market economy, these responsibilities rest with the capital market, which is a diverse structure. It consists of the stock market, the real estate market and the leverage market. The capital market, unlike the stock market, has at its disposal a financial instrument of the stock market, as well as borrowed funds with a sufficiently long maturity.
Insurance companies, banks, funds, investment companies and other financial institutions play an important role in this market. Investors, who are represented by owners of large and small companies, are engaged in the selection of the most profitable projects, since their future welfare depends on such investments. If the incomes do not just compensate for the costs of the enterprise, but also bring additional profit, then the investment result gets a higher rating than the money spent on it. Thus, profit is received not only by investors, but also by the country.
Investors are not always able to determine the profitability of a project, and therefore often the enterprises they select are not profitable. However, abandoning such projects is also impractical, because then many new ideas would remain unclaimed, and the most daring projects would simply be unrealizable. Wrong investments represent the price that society is willing to pay for the implementation of completely new technologies and innovations. The most important thing is the timely termination of unprofitable projects, which is exactly what the capital market serves. Non-state investors will not spend their time and money supporting a loss-making project.
In the event that investment resources come at the disposal of the government and are not controlled by the market, the game takes on a completely different turn. The expected return on investment is replaced by political motivation, and investment resources are directed to projects that are profitable for political associations. Many Western European countries very advantageously use the credit limits of commercial banks to solve global monetary policy issues. In Italy, in order to get a loan for a large amount, you need the permission of the central bank, but in the pursuit of profit, many banking institutions often exceed these limits. In some countries, rather stringent sanctions are provided for such violations, which is why the international capital market is still afloat.
A rapidly developing capital market is one of the most important factors in international economic relations, but at the same time it is a fairly large stumbling block.