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There is more liquidity, and availability of cash flow is there. It is a fluid market. However, when loans are difficult to get, the interest rates are higher and the financial markets come crashing down.A speculator is a person who makes financial transactions at lower liability and sells them for profit.
Speculators mostly operate on borrowed money. If there is an increase in the cost of doing business, then their buying power decreases. For example, if someone borrows money at 5 percent to purchase stocks, then they will have to sell the stock for higher than 5 percent to make profits. So, if the rates become higher, then the returns are lower. If a person is making 10 percent profits while borrowing at 5 percent, they are still making 50 percent profit. However, if the interest rate goes up to 7 percent, then there is a profit of only 30 percent. Speculators have much to lose if the interest rates go up, and the market remains the same. If there is an equal increase, then it can be justified.
If the interest rates fall, then the market will get stabilized again. If it increases the interest rate, then the market will slow down. Sometimes the banks reduce or increase the interest rates in order to stabilize the market funds flow.
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