A financial market is where securities, such as shares of stock, are issued and traded (Brealey, Myers, & Marcus, 2015).
The Bible is a sacred book that contains scriptures inspired by God, consisting of the Old Testament and the New Testament.
Financial markets are based on heterogeneity because at any given time some individuals will have excess resources while others will have need or opportunity to use resources beyond what they currently possess (TWO, 2017).
WE ARE HETEROGENEOUS
God created and gifted us with a wide variety of skills, needs, and desires.
Exodus 35:31:33 says, "and he has filled him with the Spirit of God, with wisdom, with understanding, with knowledge and with all kinds of skills, to make artistic designs for work in gold, silver and bronze, to cut and set stones, to work in wood and to engage in all kinds of artistic crafts".
In this passage, we see God's creation and his endowment to people to build the tabernacle. In addition, we were not all born at the same time; therefore, human society has a broad range of ages and life stages.
A financial intermediary is an institution that re-manufactures lender's resources into a source that is useful to lenders (TWO, 2017).
- Mutual Funds: Investment program that pools the assets of investors and invests money on their behalf (WSJ, 2017).
- Pension Funds: Fund set up by employer to provide for employee's retirement
- Hedge Funds: Private investment fund that goes after high-risk investment strategies
A financial institution is an intermediary that raises financing by accepting deposits or selling insurance policies (Brealey, Myers, & Marcus, 2015).
- Commercial Banks: Major sources of loans to corporations.
- Investment Bank: Raise money from depositors and investors and then make loans loans to individuals and businesses.
- Insurance Companies: Long-term financing of businesses (Brealey, Myers, & Marcus, 2015).
Intermediaries allow humans to fulfill God's mandates of stewardship, love, and justice.
Intermediaries develop networks of borrowers and lenders which build trust between the parties. Intermediaries enable justice by allowing households and small businesses to gain access to resources. Intermediaries allow borrowers and savers to care for each other.
THE CRISIS OF 2007-2009
It was rooted in the easy-money policies where banks took advantage and started supplying subprime mortgages to low-income borrowers. Homeowners with low initial payments, offset by significantly higher payments later.
The U.S. Federal Reserve was in part responsible because of its policy of easy-money. The U.S. government for encouraging banks to expand credit for low-income housing. The banks for promoting and reselling the subprime mortgages (Brealey, Myers, & Marcus, 2015).
THE ROOT OF THE CRISIS
What brought down the markets?
According to the magazine BusinessWeek, mentioned: "Bad choices, greed and never learning from past mistakes” (Seiglie, 2008).
Luke 12:15 says, "Then he said to them, “Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions”.
WHAT CAN WE DO?
Matthew 6:24 says, "No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money".
Brealey, R. A., & Myers, S. C., & Marcus, A. J. (2015). Fundamentals of corporate finance with Connect Plus (8th ed.). Boston, MA: McGraw-Hill.
New International Version (NIV).
Seiglie, M. (2008, November 24). The Growing Economic Crisis: A Biblical Perspective. Retrieved from https://www.ucg.org/the-good-news/the-growing-economic-crisis-a-biblical-perspective
TWO. (2017). What Does the Bible Say About Finance? (Overview). Retrieved from https://www.theologyofwork.org/key-topics/finance/
Wall Street Journal. (2017). What Is a Mutual Fund? (n.d.). Retrieved from http://guides.wsj.com/personal-finance/investing/what-is-a-mutual-fund/