Charles Wheelan

Naked Economics

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    Starbucks uses the financial markets to protect itself from sudden swings in the price of coffee.
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    Storing, protecting, and making profitable use of excess capital.
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    Third, and most important, the most ruthless and efficient thief would be inflation. If the sultan of Brunei stuffed $1 billion under his mattress in 1970, it would buy significantly less stuff today due to higher prices for nearly all goods and services.
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    be protecting his wealth, both from theft and from inflation
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    second concern would be putting his excess capital to some productive use.
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    Individuals, companies, and institutions with surplus capital are renting it to others who can make more productive use of it.
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    Harvard buys stocks and bonds, invests in venture capital funds, and otherwise puts $34 billion in the hands of people and institutions around the globe who can do productive things with it.
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    financial instruments—no matter how complex the bells and whistles—are based on four simple needs:
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    Financial instruments, like every other good or service in a market economy, must create some value. Both the buyer and seller must perceive themselves as better off by entering into the deal.
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    options, futures, options on futures, interest rate swaps, government “strips,” and the now infamous credit default swaps.
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    We borrow to do things that make us better off even after we’ve paid the cost of borrowing.
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    Sometimes we raise capital without borrowing; we may sell shares of our business to the public.
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    The bottom line never changes: Individuals, firms, and governments need capital to do things today that they could not otherwise afford; the financial markets provide it to them—at a price.
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    Thus, we trade an ownership stake (and therefore a claim on future profits) in exchange for cash. Or companies and governments may borrow directly from the public by issuing bonds.
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    making credit available to entrepreneurs in the developing world, even loans as small as $50 or $100, can be a powerful tool for fighting poverty
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    I was fascinated that a very smart group of women had tossed aside common sense to embrace a diet that could not possibly work.
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    Any investment strategy must obey the basic laws of economics
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    The rules for investing successfully are strikingly simple, but they require discipline and short-term sacrifice.
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    These jobs provide work experience, which is an important component of human capital.
    May Trinandahas quoted3 months ago
    like the rest of us, are willing to pay a price for certainty.
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