Difference between revisions of "Capital"

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Capital has both general and specific meanings that could be broadly summarized as 'investable money'. First identified by Karl Marx as money transformed by production into more money through investment in the [[capital markets]] or individual enterprise as [[venture capital]], it is today more strictly defined by bodies regulating banking institutions, modern capital's main custodians.  
Capital has both general and specific meanings that could be broadly summarized as 'money used to generate wealth through investment'.


== Marx to markets ==
== Marx to markets ==


[[Image:Kapital.jpg|float|left|70pxls]] Capital was first identified as the main driver of the modern system of economic growth by German-born economist and philosopher Karl Marx in his classic 1865 political-economy treatise "Das Kapital".<ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1867-c1/index.htm|name=Das Kapital|org=Marxists.org|date=July 29, 2008}}</ref> In the book's fourth chapter, entitled: The General Formula for Capital, Marx introduces the now-accepted idea of the accumulation of capital through investment as a never-ending cycle under 'capitalism' by showing how societies had progressed from using money as a means to buy commodities to using money to produce commodities as a means to increase value.<ref>{{cite web|url=http://www.sparknotes.com/philosophy/daskapital/section2.rhtml|name=Chapter 4: The General Formula for Capital|org=Sparksnotes.com|date=July 29, 2008}}</ref> Today most such value-producing capital is held by retail banks, [[investment bank]]s and other [[institutional investors]] who manage capital on behalf of investors. Such capital was previously subject to strict definition and regulation only at the retail-banking level, but similar restrictions have recently been expanded to the investment-bank level.
[[Image:Kapital.jpg|float|left|70pxls]] In the fourth chapter of Karl Marx's classic 1865 political-economic treatise "Das Kapital", entitled: The General Formula for Capital, Marx introduced the now-accepted idea of the accumulation of capital through investment as a never-ending cycle under 'capitalism' by showing how societies had progressed from using money as a means to buy commodities to using money to produce commodities as a means to increase value.<ref>{{cite web|url=http://www.sparknotes.com/philosophy/daskapital/section2.rhtml|name=Chapter 4: The General Formula for Capital|org=Sparksnotes.com|date=July 29, 2008}}</ref> <ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1867-c1/index.htm|name=Das Kapital|org=Marxists.org|date=July 29, 2008}}</ref>  Today most such value-producing capital is held by retail banks, [[investment bank]]s and other [[institutional investors]] who manage capital on behalf of investors. Such capital was previously subject to strict definition and regulation only at the retail-banking level, but similar restrictions have recently been expanded to the investment-bank level.
 


== Kinds of capital ==
== Kinds of capital ==
 
The standard accounting view of business capital focuses on the claims side of the balance sheet that represent sources of funding, such as shareholders' equity and paid-in earnings.<ref>{{cite web|url=http://www.riskcenter.com/story.php?id=7758|name=What Is “Economic Capital?” - A Quick Guide to the Differences between Economic Capital and Regulatory Capital|org=Riskcenter.com|date=July 29, 2008}}</ref> But regulators of financial insitutions like the [[Federal Deposit Insurance Corporation]] ([[FDIC]]), the [[Federal Reserve]] and the Bank of International Settlements ([[BIS]]) also take account of risk factors associated with different kinds of capital assets. Regulators assign different 'tiers' to bank assets when deciding what percentage of total assets must be held as required liquid capital, also called regulatory capital, at each tier. Such capital ratios are generally around 10 percent.
The standard accounting view of business capital focuses on the claims side of the balance sheet that represent sources of funding, such as shareholders' equity and paid-in earnings.<ref>{{cite web|url=http://www.riskcenter.com/story.php?id=7758|name=What Is “Economic Capital?” - A Quick Guide to the Differences between Economic Capital and Regulatory Capital|org=Riskcenter.com|date=July 29, 2008}}</ref> But regulators of financial insitutions like the [[Federal Deposit Insurance Corporation]] ([[FDIC]]), the [[Federal Reserve]] and the Bank of International Settlements ([[BIS]]) also take account of risk factors associated with different kinds of capital assets. Regulators assign different 'tiers' to bank assets when deciding what percentage of total assets must be held as required liquid capital, also called regulatory capital, at each tier. Such capital ratios are generally around 10 percent.


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