# Capital Markets **Capital markets** are the venues where long-term funds are raised and traded — the markets for stocks (equity) and bonds (debt), plus the derivatives written on top of them. They are conventionally split into the **primary market**, where companies and governments raise new money by issuing securities (IPOs, bond offerings), and the **secondary market**, where those securities then trade among investors (the stock exchanges). Their economic function is **capital allocation and price discovery**: channeling savings into productive investment and continuously repricing the value of companies and the cost of government debt. Equity markets are policed mainly by the [[SEC]]; derivatives markets by the [[CFTC]]. Capital markets stand alongside [[The Banking System]] as the second great channel of finance. Where banks intermediate (taking deposits, making loans), markets **disintermediate** — connecting borrowers and lenders directly through tradable instruments. The U.S. economy is unusually market-centric: a far larger share of corporate financing runs through bond and equity markets than in bank-dominated economies like Germany or Japan, which makes Wall Street's health unusually load-bearing for the whole system. For the KB, capital markets are the engine of **[[Financialization]]** — the decades-long shift in which financial activity grew faster than the real economy and corporate strategy reoriented toward shareholder returns (buybacks, dividends, "maximizing shareholder value"). That shift concentrated ownership in giant asset managers like [[BlackRock]] and Vanguard, whose index funds now hold controlling stakes across the entire economy — a concentration that the right attacks through the [[ESG]] and "woke capital" backlash even as it champions the markets themselves. The same markets are where [[Monetary Policy]] transmits (the Fed moves rates, asset prices respond), where crises detonate (the [[1929 Stock Market Crash]], the [[2008 Financial Crisis]]), and where the crypto industry is now seeking legitimacy — recasting tokens as a new asset class under friendly [[SEC]] and [[CFTC]] chairs. Markets are simultaneously celebrated as the purest expression of [[Free Market Fundamentalism]] and revealed, in each crisis, as deeply dependent on the public backstop. ## See Also - [[The Banking System]] - [[Shadow Banking]] - [[Financialization]] - [[Financial Regulation]] - [[SEC]] - [[CFTC]] - [[Financial System Hub]]