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Chapter 2. Destroyed by the Bubble > The Capital Markets as an Engine of Progre...

The Capital Markets as an Engine of Progress

The dot-com bubble was the result of the introduction of a new technology (the Internet as a platform for doing business) to the investing public. The capital markets' role according to economic theorists is to channel money into companies that support new technology through products and services, and thus build the new platform. To do this, capital markets raise money and bring promising new companies—via initial public offerings once companies are out of the high risk venture capital stage—to the general public that gets involved as investors. The public is also involved as customers to many of the new companies.

The capital markets are serviced by banks, mutual funds, and other financial institutions that raise money for corporations and governments, and provide investment vehicles in which people place their savings and pensions. The capital markets are made up of some of the largest businesses and best-known names in the economic world, including, for example, Chase, Goldman Sachs, Fidelity, Deutsche Bank, and so forth. All of the large firms and many of the smaller ones are also intermediaries between entrepreneurs and the individual investors, whom Wall Street labels “retail investors.” The banks are linked to the mutual funds and other financial companies that will determine which investors ultimately own a company's stock.


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