Unregulated Market structures

Well, have you ever thought of finding loopholes that make you a ton of money? Our Finance bros do it all the time. 

J.M. Keynes, one of the most popular economists of all time, explains this concept and tells us why this is bad for economies. As per his findings, government intervention is important if the economy wants to be stabilized (given that government works for the benefit of the masses).

What are Regulations?

Regulating something simply means that the entity is now being overseen by an overseeing body. In even better words, Regulation means to control something in such a way that its actions don't cause harm to itself in the future. 

Consider a child: if you let your child run around freely in a jungle, it might get into some trouble. However, if you restrict your child from unwanted actions and attend to it in a proper manner, the child has literally very less chances of getting bruised. 

There is something similar with the financial markets. 

They are needed to be regulated so as to make sure that Retail investors can survive in the market. This also brings stability into the market and encourages Foreign Direct Investors to make some investments.

Can we make money in Unregulated Markets?

The answer is Yes, you can make money, but it depends on your capital and your mindset.

Low capital generally leads to lower chances of making money, as you cannot use Averaging strategies.

Also, the investor mindset is a very important aspect.

Details?

Here is something that you must know: Unregulated markets do not have anyone overseeing their activities. 

This means that there are no gains tax.

This causes the Finance bros to be attracted more towards these types of markets. Another fact is that, in such markets, there are usually traders who don't fully understand how the market works and How a big investor can capture huge profits while depleting their Capital.

What is a Regulatory Body?

A regulatory body is what oversees the activities of the Market. It collects data, prints reports, implies taxes/fees, finds potential exploiters, presents public notices, and holds responsibility for the activities of the market.

What if there are no regulations?

There are a lot of disadvantages of an unregulated economy. Let's discuss some of those disadvantages as follows:

1. Exploitation of final buyers.

2. The Nominal price level is very high when compared to the real price.

3. Heavy losses for small investors.

4. Limited productivity in industry.

5. Income inequality. Rich get richer and the poor get poorer.

6. No taxes, hence no redistribution of income.

7. Market would become prone to FII dominance if there is no leader in the market.

8. High FII dominance also leads to drain of wealth. 

9. Loss of Productive Capital.

10. Weakening of domestic economy.