Coins : Financial Instruments, Market Bubbles and more

list of notable financial instruments with historic significance:

### Ancient Period

1. **Money/Coinage (circa 600 BCE)** – The use of coins as currency began in ancient Lydia (modern-day Turkey), facilitating trade and economic development.

### Medieval Period

2. **Bills of Exchange (8th century)** – Used by Islamic merchants, this instrument allowed the transfer of money over long distances without physically moving coins.

3. **Government Bonds (12th century)** – First issued by the medieval Italian city-states like Venice to fund wars and public projects.

### Early Modern Period

4. **Stocks and Shares (1602)** – The Dutch East India Company issued the first recorded shares, marking the beginning of modern stock markets.

5. **Promissory Notes (17th century)** – Emerged as a form of credit instrument, formalized in Europe and widely used in trade.

6. **Banknotes (1661)** – First issued by the Stockholm Banco in Sweden, these were a precursor to modern paper money.

### Modern Period

7. **Options (17th century)** – Early forms of options trading can be traced back to the tulip mania in the Netherlands.

8. **Mutual Funds (1774)** – The Dutch merchant Adriaan van Ketwich created the first pooled investment fund, precursor to modern mutual funds.

9. **Futures Contracts (19th century)** – Standardized contracts emerged in the United States, particularly in agricultural markets.

10. **Corporate Bonds (19th century)** – Became a prominent method for companies to raise capital.

11. **Commercial Paper (19th century)** – Unsecured promissory notes issued by companies for short-term funding needs.

### 20th Century to Present

12. **Mortgage-Backed Securities (MBS) (1970s)** – Pools of mortgages sold as investment products, significantly impacting the housing finance market.

13. **Credit Default Swaps (CDS) (1990s)** – Financial derivatives allowing lenders to hedge against the risk of default.

14. **Exchange-Traded Funds (ETFs) (1990s)** – Investment funds traded on stock exchanges, offering diversification and liquidity.

This timeline reflects the evolution of financial instruments from ancient times to the present, highlighting key developments that have shaped global financial systems.

The financial instruments with historic significance in chronological order:

1494 – Double-Entry Bookkeeping: Luca Pacioli, the “Father of Accounting”, published the first ever book on double-entry bookkeeping: Summa de Arithmetica, Geometria, Proportioni et Proportionalita. This innovation laid the foundation for modern accounting practices and is still widely used today ¹.
1571 – The Royal Exchange (Commodities): The Royal Exchange in London, established by Sir Thomas Gresham in 1571, was the first purpose-built center for merchants to trade commodities in England ¹.
1602 – First IPO: The Dutch East India Company (VOC): The Dutch East India Company formally announced its IPO in the corporation’s founding charter on March 20, 1602 ¹.
1608 – The First Short: Isaac Le Maire: Isaac Le Maire began a short-selling campaign (i.e. “bear raid”) designed to bring down the VOC’s share price ¹.
1610 – The First Dividend: The Dutch East India Company’s (VOC) paid its first dividend to shareholders in 1610 ¹.
1837 – Telegraph: The invention of the telegraph, credited to Samuel Morse, revolutionized long-distance communication and had a significant impact on the financial industry ¹.
1933 – The First Commodity: The first commodity was introduced in 1933 ¹.

Please note that this is not an exhaustive list and there are many other financial instruments that have played a significant role in the history of finance. Each of these instruments has contributed to the evolution of the financial markets and the global economy in their own unique ways.

Market bubbles in chronological order:

Tulip Mania (1637): This was one of the first recorded market bubbles and crashes. It occurred in the Netherlands during the Dutch Golden Age when prices for some tulip bulbs reached extraordinarily high levels and then dramatically collapsed ¹.
South Sea Bubble (1720): The South Sea Company, granted a monopoly on trade with South America, experienced a sharp rise and fall in share prices. This was a result of irrational expectations of the company’s future profitability ¹.
Railway Mania (1840s): This was a speculative bubble in Britain in the 1840s. It followed a common pattern: as the price of railway shares increased, more and more money was poured into railway investments; at the peak of the mania, vast sums of money were being spent on unprofitable lines ¹.
Wall Street Crash of 1929: Also known as the Great Crash, it was a major American stock market crash that occurred in the fall of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange collapsed ¹.
Dot-com Bubble (1995-2001): This was a speculative bubble covering roughly 1995–2001 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the Internet sector and related fields ².
Housing Market Bubble (2008): The United States housing bubble was a real estate bubble affecting over half of the U.S. states. It was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012 ².

Instruments used during these events varied but included stocks, bonds, futures. For example, during the Dot-com Bubble, technology stocks were the primary instrument. In the 2008 Housing Market Bubble, mortgage-backed securities played a significant role ³ ⁴ ⁵. It’s important to note that while these instruments can be used to accumulate wealth, they also carry risks, as evidenced by these historical events. Proper understanding and management of these instruments are crucial to avoid potential losses ⁶ ⁷ ⁸.

War bonds are the most prominent financial instrument used to finance modern wars. They are debt securities issued by governments to raise money for military operations and other wartime expenditures. Here’s a breakdown:

War bonds: These are bonds issued by governments at a discounted rate to raise money for war. They are typically seen as a patriotic way for citizens to support the war effort. While they may offer lower interest rates than other investments, they can be a way for people to show their patriotism and help fund the war.

Some of the well known war bonds include: * Liberty Bonds: Issued by the United States government to finance its involvement in World War I. * War Loan: Issued by the British government to finance its involvement in World War I and World War II. * Victory Loan: Issued by the United States government to finance its involvement in World War II.

It’s important to note that stocks are not typically used to finance wars directly. Stocks represent ownership in a company, and wartime spending typically does not involve buying shares of companies.

Here are some other financial instruments that governments may use to fund wars:

Taxes: Governments may raise taxes to increase revenue during wartime.
Printing money: This can lead to inflation, but it can also be a way to finance war in the short term.
Borrowing from other countries: Governments may borrow money from other countries to finance war.

While war bonds are a well-known financial tool used during wartime, it’s important to remember that they are just one piece of the puzzle. Governments use a variety of financial instruments to fund wars.

Leave a Reply Cancel reply