Share Finance concepts 101
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What is a barter system?
Swap/exchange goods for goods
What are the 3 main purposes of money?
Medium of exchange/store of value/unit of account
Give 3 examples for money that’s not coins or banknotes
cigarettes, stamps, grain, shells, etc.
How is Bitcoin different from other currencies?
No regulating country, more anonymous, speculative asset
What is the gold standard?
Money is redeemable for a specific amount of gold; can't issue more money than gold reserves
The Nobel Prize winning economist Milton Friedman said, "The pieces of green paper have value because …
… everyone thinks they have value."
What are the 3 main ways lenders and borrowers interact?
Bank deposits/loans, bonds, stocks
What is a bond? (Keep it simple)
An IOU
What is a stock/share?
A slice of ownership
What is common in bonds and stocks?
They are traded on markets
What is a mortgage?
A loan with a house as collateral
What is “to default/a default”?
When a borrower stops paying back what they owe.
What is a subprime mortgage?
Loans to people with low income and a poor credit history.
What did the US government do to stabilize the financial market in 2008?
Emergency loans to banks (bank bailout), stimulus package with tax cuts
What is a perverse incentive?
When a policy ends up having a negative effect, opposite of what was intended
Alan Greenspan said about the bank bailout, "If they're too big to fail, …"
"... they're too big."
