According to the Boston-based firm McKinsey, the world's financial assets now total more than $118 trillion and will exceed $200 trillion by 2010 if current trends persist. The stock of global financial assets has grown faster than the world's GDP, indicating that financial markets are becoming deeper and more liquid. With a few qualifications, this trend bodes well for the world's economies, since deeper markets provide better access to capital and improve the allocation of risk. Much of the growth in global financial assets comes from a rapid expansion of corporate and government debt, with all of the attendant benefits and risks. The roles that major countries and regions play in capital markets are changing. The United States has the largest of them, which attracts foreign issuers and investors alike. European markets are becoming more integrated, however, and are gaining in market share and depth. Meanwhile, Japan's role in global capital markets is diminishing and China has become a new force.

Although we talk about a global capital market, just four areas account for more than 80 percent of the world's financial stock: the United States, the Euro zone, Japan, and the United Kingdom. Furthermore, regions differ starkly. The market of the United States — which, with $44 trillion in financial assets, accounts for 37 percent of the world's financial stock — is dominated by private debt and equity. In Europe, banks play a larger role in finance. Asian financial markets are relatively isolated from one another and differ in important ways. Japan has the region's largest financial stock, but it is relatively stagnant and only the expansion of government debt fuels its growth. China's financial market, though less than one-third the size of Japan's, is among the world's fastest growing, and the country has amassed a sizable portion of the world's bank deposits.