Posted on March 20, 2010.
Can someone please explain the money markets to me? That is a document of Personal Finance, and I'm having trouble understanding exactly what they are, how they function, their pros and cons, etc. Any help would be appreciated! :)
Currency markets are highly notes of the obligation - or debt instruments ultra - issued by borrowers. They are purchased by institutions and because they are so short term, institutions can not guarantee that they will maintain their value. They must also be highly rated AAA or so, by organizations such as the S & P, Moody's.
The highly visible event that happened last year with the MM fund was that they had lied, and has invested in Lehman CDOs, which are short, so when the Lehman could buy and collapsed, the Fund's net asset value went below $ 1.
It was also then that they discovered that the rating agencies had lied and AAA toxic debt, destroying their reputation.
That is why many banks have had to defend the financial system by guaranteeing the value of MM accounts at much higher - $ 250,000 - to reassure the public. Otherwise, there would be a run on banks, and all major banks in the world would have collapsed because they held all the varying degrees of toxic debt instruments.
Hello
A money market account is a type of savings account offered by banks and credit unions, like ordinary savings accounts. The main differences are:
- Money Market Accounts require a higher minimum balance savings accounts.
- Some money market accounts allow privileges checks.
- Money market accounts limit the number of withdrawals per month.
Because of these restrictions, banks have more flexibility to use funds in your account and depositors receive higher interest rates
The money market account is insured by the Federal Deposit Insurance Corporation (FDIC), which means that even if the union of bank and credit goes out of business, your money will always be there.
Hope this helps!
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Brad
