Final answer:
Global financial markets are important to lenders as they aid in money creation, the convenience and safety of transactions, and allow for economic growth. Lenders can manage credit and risk more effectively with these markets. However, when these markets fail, it can lead to widespread economic hardships
Step-by-step explanation:
Global financial markets are pivotal to lenders because they facilitate the creation of money and enable economic gains. When these markets function efficiently, they enhance the convenience and safety of transactions across the economy. Lenders benefit from global financial markets because they allow loans to be bought and sold in the secondary market, expanding their capacity to provide credit and manage risk. Moreover, financial institutions evaluate the perceived riskiness of loans and the interest rates compared to current market rates when considering loan acquisition in these markets.
The health of banks is crucial; if they face stress, sectors that rely on borrowed money, such as business investment, home construction, and car manufacturing, could suffer. As seen during the 2008-2009 Great Recession, a decline in the availability of loans can be detrimental to the economy. Furthermore, interconnectedness in financial markets can lead to a widespread financial crisis, impacting both investors and the general public. Therefore, global financial markets and their proper functioning are essential to lenders who play a significant role in maintaining economic stability.