The Economist - Guide to Financial Markets [antikvár]

1 Why markets matter The euro is slightly higher against the yen. The Dow Jones Industrial Average is off 18 points in active trading. A Chinese airline loses millions of dollars with derivatives. Following the Bank of England's decision to lower its base rate, monthly mortgage payments are set to fall. All these events are examples of financial markets at work. That markets exercise enormous influence over modern life comes as no news. But although people around the world speak glibly of "Wall Street", "the bond market" and "the currency markets", the meanings they attach to these time-worn phrases are often vague and usually out of date. This book explains the purposes different financial markets serve and clarifies the way they work. It cannot tell you whether your investment portfolio is likely to rise or to fall in value. But it may help you understand how its value is determined, and how the different securities in it are created and traded. J In the beginning The word "market" usually conjures up an image of the bustling, paper-strewn floor of the New York Stock Exchange or of traders motioning frantically in the futures pits of Chicago. But formal exchanges such as these are only one aspect of the financial markets, and far from the most important one. There were financial markets long before there were exchanges and, in fact, long before there was organised trading of any sort. Financial markets have been around ever since mankind settled down to growing crops and trading them with others. After a bad harvest, those early farmers would have needed to obtain seed for the next season's planting, and perhaps to get food to see their families through. Both of these transactions would have required them to obtain credit from others with seed or food to spare. After a good harvest, the farmers would have had to decide whether to trade away their surplus immediately or to store it, a choice that any 20th-century commodities trader would find familiar. The amount of fish those early farmers could obtain for a basket of cassava would have varied day by day, depending upon the catch, the harvest and the weather; in short, their exchange rates were volatile. The independent decisions of all of those farmers constituted a basic V i L ¦ rj 'A K;