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Financial Knowledge Answers
Author Brooke Viewed 258 Published on 08/10/31
What is Finance ?
Jin, gold; Rong, integration; finance - the integration of gold. At all times and in all countries, gold has become one of the most ideal representatives, storages, stabilizers and media of exchange of economic value due to its characteristics such as indestructibility, high plasticity, relative scarcity, infinite divisibility, homogeneity and bright color. 1, and therefore become the object of love and pursuit by the world.
Gold once became the only medium in international trade. In the era of barter economy, merchants could only carry out counterpart transactions and barter. Therefore, human economic activities were greatly restricted. In the era of gold standard economy, value and wealth are based on physical assets - gold. This objective physical method is very conducive to the stable development of the global economy. However, as a carrier of value circulation, gold has the disadvantages of inconvenient physical constraints such as handling, carrying, and conversion, making it give way to more flexible banknotes (currency). Today, the monetary economy has not only replaced the original barter economy, but also covered the gold standard economy. While the monetary economy has brought unprecedented economic freedom to mankind, it has also brought many troubles and problems to mankind, such as unbalanced world trade, inconsistent values, inflation, currency devaluation, ups and downs in economic development, and so on. One of the important macro factors that triggered the financial crisis that swept the world was the global trade imbalance, especially the huge US trade deficit.
The original intention of breaking away from the gold standard was to achieve economic freedom and stable development. However, today it has backfired. In today's era of currency diversification, the amount of "gold" in modern finance is getting smaller and smaller, but its connotation, role and risks are getting wider and larger, and have penetrated into every corner and every corner of society. in personal life.
To sum up, finance is the circulation of value. Without the circulation of value, finance becomes a "stagnant water" and value cannot be converted. If value cannot be converted, the economy cannot function. The economy cannot function and new value cannot be generated. If new values ??cannot be generated, human society cannot develop. Therefore, when a financial crisis develops to a certain extent, it will evolve into an economic crisis, and when an economic crisis develops to a certain extent, it will evolve into a social crisis. The underlying causes of world wars are economic problems. (Explanation by financial expert David Ding)
What is finance?
Finance refers to the financing of monetary funds, which can be divided into direct financing and indirect financing. The difference between these two financing methods is whether there is the involvement of financial institutions. If not, it is direct financing, and if it is indirect financing Financing.
According to Mr. David Ding’s point of view, finance is a tree! Although finance belongs to the realm of human consciousness, it must follow the laws of heaven and earth—the laws of the earth. Trees are the epitome of the laws of the earth. "Financial Tree" reveals the only objective law of financial development and changes through trees. All financial crises are man-made, should not happen, and are avoidable. But until humans master the basic laws of finance, financial crises will be inevitable. Years of research and practice have proven that finance is like a "tree". If the principles and laws of the "tree" are violated, a financial crisis will definitely occur. (Explanation by financial expert David Ding)
What are financial products?
Financial products refer to various carriers of economic value, such as cash, stocks, futures, etc. For example, we say that Zhang San is very rich, but he spent 3 million yuan to buy stocks, and now the market value of these stocks is less than 1 million. From this example, we see that value is transformed and exists in different carriers. Except in rare cases, such as gold bars, gold bricks, etc., this carrier often exists in the form of non-physical securities, so it is also called a financial asset. In addition, because financial products can be used to make profits, they are also called financial instruments. The above Zhang San used money to buy stocks because he wanted to use stocks as a financial tool to make money.
Many financial products have evolved from real assets. For example, Microsoft's stock has evolved from the actual assets of Microsoft, and Microsoft's stock futures and options have evolved from Microsoft's stock. evolved. Another example is that mortgage-backed securities are derived from houses. Just like leaves come from branches, branches come from trunks, and trunks come from roots. They are intertwined and influence each other.
In the past 20-30 years, innovation has been the most fashionable. The "elites" on Wall Street are even more afraid to lose ground. They racked their brains and constantly innovated, creating a variety of financial products that were so colorful and messy that they themselves could not even understand them, let alone control them. As a result, the financial tree of the United States was seriously imbalanced and overwhelmed. This is the system and market reason why Wall Street is almost "self-destructing" this time. This is also one of the reasons why the American people are very reluctant to save Wall Street. (Explanation by financial expert David Ding)
What is the financial market?
Simply put, the financial market is the market where all financial products are traded and where all financial practitioners work. The financial market can also be called the financial system, although it is very imperfect. Since the financial market is the market where all financial products are traded, it covers a wide range of fields and involves a lot of content. A brief introduction will be given here, and a detailed introduction will be given later.
Financial market or financial system is the largest category in this field. It is very complex and can be divided in different ways. First of all, the core system of finance includes: banking system: securities system: insurance system. The broad financial system also includes hedge funds, venture capital, trust funds, private equity funds, etc.
All financial markets are capital markets. If divided according to the term of funds, that is, the length of time, the banking system and securities system include short-term capital markets, that is, money markets, and long-term capital markets, that is, capital markets. (Explanation by financial expert David Ding)
What is a financial institution?
Financial institutions refer to financial intermediaries engaged in the financial services industry and are part of the financial system. The financial services industry includes banking, securities, insurance, trusts, funds and other industries. Correspondingly, financial intermediaries It also includes banks, securities companies, insurance companies, trust investment companies and fund management companies, etc. (Explanation by financial expert David Ding)
What is a financial crisis?
Financial crisis refers to a financial-related crisis, that is, a crisis in financial assets, financial markets or financial institutions, such as stock market crashes, bankruptcy of financial institutions, etc. Financial crises such as the above-mentioned cases occur from time to time at home and abroad. However, depending on the market and country, if the individual crisis is not handled promptly and properly, it can easily evolve into a systemic financial crisis. The global financial crisis caused by the United States is a perfect example. Subprime mortgages are just a branch of the financial tree in the United States. Its break was not dealt with in a timely manner, causing the entire tree to almost collapse. The collapse of the entire tree in turn led to a global financial disaster. (Explanation by financial expert David Ding)
What is a systemic financial crisis?
Systemic financial crises are those that affect the entire financial system and even the entire economic system, such as the U.S. financial crisis in the 1930s that triggered the Great Depression of the Western economy, and the Japanese financial crisis in the 1990s that led to Japan's economic malaise. The Asian financial crisis that hit Southeast Asia in the second half of the year, etc. These crises spread from one financial market to another, such as from the stock market to the bond market, foreign exchange, real estate and even the entire economic system.
(Financial expert David Ding explains)