Banking & Finance
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Business: Barter, Exchange, Credit, Token
Since the time when Man first had the need to trade with others in their tribe or with foreign tribes, metods have been invented that would secure the trade so no disadvantage occured between byer and seller.
Man invented various methods such as:
- Barter: Where the exchange of services for goods.
- Exchange: Where equal value of goods were exchanged.
- Credit: Where a person was given something on the promise it would be returned with interest.
- Token: Where the value of the goods or services was written or stamped on objects that were easy to carry, to be used for future exchange, barter, credit or purchase.
All four methods were used simultaniously within the tribe or in dealing with foreign tribes. As it depended upon the types of services or goods that were being offered, the type of season, or the passing on of customs.
Today we are able to find all these methods in a single service offered by BBX. You can buy, exchange, barter, credit and tokens of sale. These can be used for bying Food, Services, Property, Insurance and Superanuation.
This enables each person who owns a business to plan for good and bad times as well as secure their future wealth and places of comfort.
The Ancient Roots of Today's Financial Tools
From Egyptian papyri to high tech instruments, visiting professor William N. Goetzmann uses it all to study financial technology and innovation from ancient times to the present. His question: What made these innovations possible and what sustained them?
Take a bank check. Most people assume this financial convenience is fairly new, certainly not more than a century or two old.
But according to William Goetzmann, a visiting professor from Yale University who is fascinated by financial instruments as windows on technology and innovation, bankers' checks written in Greek on papyri appeared in ancient Egypt as far back as 250 B.C. Papyri preserved well in Egypt thanks to its arid climate, but Goetzmann thinks it's safe to say such checks changed hands throughout the Mediterranean world.
"So the whole tradition of bank checks predates the current era and has its roots at least in Hellenistic Greek times," he says.
It is these sorts of innovations through history that fascinate Goetzmann, who is teaching and conducting research through June at Harvard Business School. At Yale he is Edwin J. Beinecke Professor of Finance and Management Studies and Director, International Center for Finance at the Yale School of Management. Equally at home discussing modern trends in hedge funds and real estate, Goetzmann is searching for the roots of "things we teach our students now like present value calculations, mathematical tools for valuation of securities and properties, financial contracts, and how people developed ways of investing and diversifying their portfolios through time."
Aside from coauthoring books on modern finance topics such as equity risk premiums, modern portfolio theory, and investment analysis, Goetzmann also co-edited The Origins of Value: The Financial Innovations that Created Modern Capital Markets (Oxford University Press, 2505). He continues to research and write on his own about innovations in ancient Babylon and China, Hellenistic Egypt, and the Middle Ages forward. In addition to examining the papyri, which through the miracle of modern technology are available online, he also inspects mammoth leather-bound volumes and reams of documents at Baker Library. But modern financial tools interest him as well, especially those for hedge funds.
Secrets in papyri
The idea of a bank check seems like such a straightforward tool, he says. "It's essentially a letter to your bank saying please pay to this person such and such amount of money. There is some suggestion that this was a tool used in the Middle Ages by Islamic merchants.
"I began to look in papyri collections. Lots of different libraries have papyri they have scanned in, so it's like a virtual library. A huge collection is the Oxyrhynchus Online collection." With the help of a research assistant he is systematically creating a catalog of all the financial instruments indicated on these papyri; the checks written in Greek date up to about 400 A.D.
"My interest is in asking questions about how that changed," he continues. "What made those kinds of innovations possible and what sustained them?" Many other researchers emphasize the legal systems underpinning such innovations. Goetzmann agrees that in order to have pieces of paper represent wealth there must be a good legal system in place. There also needs to be a financial system that relies on accounting.
Hazardous journey for bills of exchange
By the eighteenth and nineteenth centuries, transatlantic payments between the new world and Europe were typical in commerce—yet fraught with risk. "When someone in America wanted to make a payment to somebody in England, Spain, or France in the eighteenth century, they used a bill of exchange that was sent overseas and said, 'Pay to this person this amount from my account.' The only problem was that in these distances across the ocean sometimes boats didn't make it and the bill of exchange sank with the boat."
To avoid delay, individuals or merchants dispatched multiple copies of the checks. The first one that arrived would be paid whether it was the first or fourth copy; all subsequent drafts would be cancelled. While examining financial securities at Baker Library, Goetzmann was pleased to recognize the prominent signatory of one check: John Hancock.
Goetzmann is also interested in learning how investment portfolios have been diversified through time. Bourgeois Europeans 250 years ago tended not to record their investments as groups, so physical portfolios are hard to come by. But he would like the answer to these questions: Did people at the time invest in industry or land? How much did they rely on financial instruments? Just how risky were their portfolios?
"I'm also interested in Italian finance and the development of banking institutions in Renaissance Italy," he says. Using enormous leather-bound ledgers, he's studying the record of all financial transactions of a charitable fund, the Monte di Pieta, which existed for hundreds of years on the east coast of Italy. "These banks were created in many Italian cities as a Christian response to Jewish lending," he says.
You actually get a very tactile sense of financial life. |
Ledgers for the Monte di Pieta contain everything from the records of tenant farmers collecting wheat and distributing agricultural products to transactions indicating the fund's as a veritable pawnshop in an era of banking that relied on secured lending with objects that were portable. The Monte di Pieta functioned as a banker for the local municipal authority, and also sold annuities that appear similar to modern life insurance. "Someone would give money and say, 'My daughter is my beneficiary and I want you to pay out a certain amount of money for the rest of her life.'" Through the leather volumes, he says, "you actually get a very tactile sense of financial life. You can really get a sense of the role of a financial institution in an Italian city."
South Sea Bubble
Another financial puzzle for Goetzmann is known as the South Sea Bubble. In the early 1700s, the South Sea Company's elaborate scheme to relieve the British government of public debt attracted investors in droves. Many such investors lost everything.
"Today we see wealthy people telling each other to invest in this or that hedge fund," he says. With Larry Neal, a world-renowned expert on finance in the Golden Age and a specialist in the South Sea Bubble, Goetzmann is trying to understand as a collection the South Sea Company's financial documents that operated effectively as stock certificates. These are pasted into a big book. Investors were the rich and famous of their day, he says, and their behavior invites speculation about the forces of peer influence. "There must have been social reasons behind the rush to invest in this company," he says.
Trends in finance circa 2506 A.D.
"I'm quite generally interested in investment management today," continues Goetzmann. "I work on hedge funds and their role in financial markets and investment portfolios, and in real estate as an asset class. Both of those are hot topics.
"They're interesting to compare because on one hand real estate is a traditional buy and hold asset, while hedge funds by their very nature trade securities very quickly. The expected return of these two disparate asset classes is fairly similar. For the most part they are both uncorrelated to the stock market, and they both expect to return something close to 4 percent per year more than inflation or Treasury bills.
"We're always seeing new things happening in both sectors. In real estate, innovation has been in the securitization of leases and the development of commercial mortgage-backed securities. Both of those two things have greatly facilitated transactions in the market.
"With hedge funds, they are always seeking to exploit small deviations of value within and across markets. The tools that they use are always new and incredibly inventive and pushing boundaries of what we think of as financial markets instruments. That makes them really an entertaining asset class to study."
And unique in their own way, perhaps, as a bank check inscribed on papyrus.