What makes international finance so fascinating is that, thanks to the miracle of modern electronic banking, you are linked financially with billions of people you don't even know.
Let the foundation of profitable trade be thus laid that the exportation of home commodities be more in value than the important of foreign, so we shall be sure that the stocks of the kingdom shall increase, for the balance of trade must be returned in money or bullion.
Peace is the natural effect of trade. Two nations who traffic with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.
People in countries with a weak currency learn fast about options.
...it would be intellectually and politically wrong to jump to the conclusion that derivatives single-handedly destroyed all fixed exchange-rate systems. Some observers, even in the political arena, depict derivatives as the principal villains ot today's financial world. Financial markets, with a few exceptions (where market participants behave like sharks which try to bite through iron cages when they smell blood), do not ‘attack' currencies. Market will take large positions only if they sense that exchange rates are not sustainable. Derivatives may increase leverage, but they are nonetheless, only the instruments which effect a position, not the reasons for taking it. Derivatives do not kill fixed exchange rates; fundamental misalignments do.
When the central banks of two countries decide to intervene in concert, they can make the rest of the street think about picking on someone else. Central banks want to keep the fear of God in the market - God being the central bank."
The whole business of international finance is dumbfounding. These damn business cycles - we don't know whether to lie around the Riviera, clipping the coupons on bonds, or sit around the kitchen table, clipping the coupons in newspapers. Investments cause me to act silly. One minute we're loading our possessions on top of the Ford and fleeing the dust bowl. The next minute we're buying dust futures on the Chicago Commodity Exchange.
1998, p. 31
For years, professional traders bulked up their bonus checks on the volatility created by various currency crises, hyperinflation, devaluations and governments changing hands more often than the Cincinnati Bengals change quarterbacks.
Christian Sippel
Futures, December 2002
p. 60
Last updated: January 9, 2011