1 thought on “[Reading Notes] Basic Principles of Finance -Currency”

  1. The essence of currency is: general equivalent.

    What is general equivalent? It is a recognized thing that everyone can make transactions more fair. This thing requires the characteristics of easy preservation, easy segmentation, and measurement. (For example: ancient Ethiopia, ancient Greece, ancient Rome, and the tribal era before the Shang and Zhou dynasties used salt as currencies for transactions.) When entering a civilized society, humans found something more suitable for currency: gold and silver: gold and silver Essence

    Marx once said: "Gold and silver are naturally not currency, but the currency is naturally gold and silver." The first half of this sentence is well understood. Gold and silver's interest only stays as decorations or utensils, so pure natural gold and silver are not currency. However, after a long social development, humans have gradually eliminated some currencies that are easy to smelting (such as iron coins) or extremely uneven distribution (such as scallops), and slowly sending gold and silver is the best currency.

    Why? Because gold and silver meet the following characteristics of becoming currency: 1. It is not easy to be produced, and has high recognition and unit value; 2. It is easy to carry and store; Coupled with the habit of human beings for thousands of years, it gradually established the position of gold and silver in the economic system. As a currency, gold and silver not only play the role of general equivalent, but also have the role of wealth storage and wealth investment. Therefore, it also plays a great role in the financial world.

    This (or metal) as a currency history is very long. In the development of human beings for thousands of years, currency has always appeared in the form of metal. But gold and silver have a natural disadvantage, that is, the weight is large, it is not easy to carry and carry, and the mining cost is too high. As a result, people invented banknotes. Why is banknote accepted? Take a little chestnut: During the Tang Dynasty, holding 2,000 copper coins can be successfully bought for a bunch of Shujin. It can be seen from this example that the so -called "currency" is actually the reputation of an institution (more often the government). The reason why currency can be recognized by the market is because the government endorses it. The emergence of banknotes is the evolution of government reputation. This is why the dollar can pass throughout the world, but Zimbabwe's money has been regarded as a waste paper, because the former has a strong reputation and the latter is not.

    I just discussed that banknotes can be circulated in the market, which is essentially because of people's recognition of government reputation. It can also be concluded that anyone can make currency, but whether the currency is worthy to determine whether anyone recognizes it. In 2009, a person named "Nakamoto" put forward the concept of Bitcoin on the Internet. The development method of Bitcoin does not rely on institutional distribution. Design to ensure the safety of all aspects of currency circulation. Everyone can make Bitcoin, without identity, credibility and technical threshold, so it is very popular for a while.

    The development of Internet technology has opened a network virtual world. The emergence of the virtual world also allows virtual currency to occur. The Q coins, micro coins, Baidu coins, etc. we usually contact are all virtual currencies that can be traded in specific scenes. The reason why we are willing to acknowledge the value of Q coins is because Tencent endorses it, and we choose to believe and recognize Tencent. Bitcoin is more crazy than Q coins. At the beginning of Bitcoin, Bitcoin was only a kind of network tool to fight the existing monetary system, but now it has gradually become a tool for investment or even speculative. Many people are determined that Bitcoin will replace traditional currency, so they spend a lot of actual currency to buy Bitcoin. But the question is: Is there a reputable endorsement in Bitcoin? Judging from the current situation, no country or economy will end up for Bitcoin, and maybe there will be no future. What is the value of Bitcoin?

    The author in the book mentioned: "If a product buyers really like this product, I think this product has the function of use, then this is a normal product. But if investors or buyers are buyers or buyers The purpose is not to be used, but to sell this product to the next victim at a higher price in the short term. This is a typical Ponzi scam. "Even the reality currency is difficult to resist the strike of the financial crisis. What's more, the virtual currency that does not exist at all? Therefore, behind the virtual currency is a huge risk bubble. Once this foam is broken, it will no longer be worth it.

    If financial leverage is a well -known topic in finance. What is financial leverage? Visible is that the participants of the financial system use leverage and leverage the huge amount of transaction volume at a small cost to enlarge the yield. Take a "leverage" chestnut: A company wants to invest in a 100W project, but there is no enough cash on the book and can only invest 5W. The company uses its own fixed assets as a guarantee, and the financing borrowing is 95W yuan. This is the investment of 100W with 5W, with a leverage of 20 times.

    "leveraged" caused the amount of financial assets to expand sharply, so there may be A guarantee for B, B is a loan, and C is Ding Zhong repeated loan. Chaos. Under the "power" with huge leverage, the securities investment and pledge credit of various financial institutions have enlarged the benefits and risks in virtually.

    It's leverage, it has to be mentioned "currency leverage". Under different backgrounds, the role of currency leverage is also different. Many financial scholars define currency leverage as "the use of debt fundraising when formulating capital structure decisions." It can be seen that one of the role of currency leverage is debt fundraising, so currency leverage is often called "financing leverage", "capital leverage" or "liability management". Another understanding is that currency leverage means properly bonds in fundraising. Enterprises can use this to adjust the capital structure with leverage to bring additional benefits to enterprises. If an enterprise operates (currency leverage) due to liabilities, the profit of the enterprise is rising, called "positive leverage". On the contrary, if the interest rate of the enterprise falls per share due to poor debt management, it is called "negative leverage".

    The rapid development of my country's economy for decades, especially private companies have created huge wealth, which actually benefits from the role of currency leverage. The government and banks solve the problem of funds for enterprises through economic subsidies, commercial loans, etc., helping the enterprise through the period of financial danger. With the success of the company's research and development, the new project brings employment opportunities to hundreds of local people, and also makes the enterprise also given the enterprise The scale of operation has doubled in several years. Corporate profits and taxes have also taken several steps. As a result, the government's currency investment has been exchanged for dozens or even hundreds of times.

    emerging market countries like my country. Because of the rapid development of the economy and large room for currency demand, it is bound to use currency leverage in large quantities. But for a long time, it will inevitably cause hidden dangers to the economy. Therefore, the theme of China Finance is no longer lever, but deleveraging. From the large -scale use of currency leverage to financial leverage, this is a symbol of a financial market to mature. Financialists divide "deleveraging" into five stages, and believe that a complete financial market must go to these five stages:

    change". In essence, a large number of derivative financial products generated on the basis of securitized assets are reduced, and it is also a reduction in the root cause of leverage.

    The second stage: "deleveraging of financial institutions". The decrease in the purchase of "leverage" financial products in commercial banks is actually reducing the risk of commercial banks.

    The third stage: "deleveraging of investors". The occurrence of the second stage greatly weakened the intermediary function of financial institutions. As a result, various institutional investors who have relying on financial institutions for a long time to obtain some short -term funds have become a source of water, so they have to sell their assets to maintain sufficient cash levels to prepare from time to time.

    The stage fourth stage: "deleveraging of consumers". Investors' sale of assets has exacerbated the shrinkage of various types of assets and generated a negative wealth effect. Consumers can only choose to reduce debt bonds and increase net savings to buffer the sluggishness of family net wealth.

    The fifth stage: "deleveraging of the global economy". Also known as "globalization". That is, governments have introduced economic policies in the face of economic deterioration, removing currency leverage from the government level, and reducing economic risks.

    I international hot money, also known as evasive capital, is a mobile fund without specific purposes. To be precise, it is the rapid flow of funds in the international financial market to pursue the highest compensation and anytime risk. It is characterized by: short -term, arbitrage and speculation. With reference to the Chinese Ming government from the European businessmen to "send" a large number of silver, because the currency depreciation is extremely fast, it cannot be prohibited from circulating in the market, which is forced to choose the chestnuts that are closed to the country. Baidu), the emergence of international hot money often forms a huge wave of speculation, and after its evacuation, it often leaves a great economic crisis.

    The emergence of international hot money will bring huge uncertainty to the original stable market (I do n’t know when it will evacuate, and the vacancy left after the evacuation can only be filled by the country's currency. If If you can't fill it, you will break out of the financial crisis), so many countries avoid it. The most classic case was in 1997. Soros controlled the large number of international hot money to sell the Thai baht in large quantities, and then caused the disaster to Indonesia, the Philippines, Malaysia, Myanmar and other countries. ash.

    is also capital. International investment can promote economic development in a region, but international hot money may bring great destructive power. Where is the reason? Explanation with an idiom is "salary at the bottom of the kettle". The international hot money is like a pile of firewood, burning the economy of a country hot, quickly getting out of evacuation at the hottest, leaving a messy stall to clean up by the country by itself. A chestnut is raised in the book: House prices in a certain place were originally 100W. Because of the influx of hot money, house prices continued to rise, making people who have to buy higher prices out of investment psychology or just need to buy higher prices. When house prices are at a relatively high price, the hot money suddenly withdraws and quickly takes time to take the capital of the land. At this time, the remaining people's hands are gone except for the continuous depreciation of the real estate. Hot money is taken away in various forms ...

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