11. Will bitcoin replace fiat currency ?

Since the emergence of the cryptocurrency of Bitcoin blockchain – the bitcoin, many people believes that bitcoin is going to replace fiat currency as “money” such that the whole country is going to adopt bitcoin as currency on a massive scale: your salary will be paid in bitcoin, every goods and services will be pricedContinue reading “11. Will bitcoin replace fiat currency ?”

10 – The Origins of Asset Backed Securities (ABS) – Part III

In the Part I and Part II of the origins of ABS, it’s shown: The difference between traditional banks that practiced deposit financing and shadow banks that practice market financing. ABS, MBS, CDS, CDO, ABCP are liabilities issued by shadow banks such as SPVs to raise fund from investors to acquire different types of assets.Continue reading “10 – The Origins of Asset Backed Securities (ABS) – Part III”

9 – The Origins of Asset Backed Securities (ABS) – Part II

In the last article we have seen how the shadow banks finance their acquisition of assets via market financing (or securitization) as compared to deposit financing practiced by commercial banks. Before we start, remember: All financial institutions raise funds to acquire assets by issuing their liabilities. Commercial banks raise fund finance the acquisition of assetsContinue reading “9 – The Origins of Asset Backed Securities (ABS) – Part II”

8- Credit Theory of Money (Part II)

In the Part I of Credit Theory of Money, we have seen a few things: When we buy, we acquire debts; when we sell, we acquire credits. In other words, when we buy, we become debtors; when we sell, we become creditors.  We can use the credit we acquire from somebody to redeem the debtsContinue reading “8- Credit Theory of Money (Part II)”

7 – What financial instrument – Bonds, Stocks, Loans, deposits, currency etc really is?

What are financial instruments such as Bonds, Stocks, Loans, Currency and Bank deposits etc. really is?  In fact, they’re not complicated. All of them are promissory notes. Section I : What is a promissory note? Anyone can make any kind of promise. For example: “I promise to complete the work today”, “I promise to bringContinue reading “7 – What financial instrument – Bonds, Stocks, Loans, deposits, currency etc really is?”

6 – The Origins of Asset Backed Securities (ABS) – Part I

In the movie “The Big Short”, there’re a bunch of financial instruments such as ABS, MBS, CDO, CDS being brought to the screen. What are those financial instruments actually? How are they created? The answer is: ABS, MBS, CDO, CDS – all of them are liabilities issued by “shadow banks” such as investment banks, hedgeContinue reading “6 – The Origins of Asset Backed Securities (ABS) – Part I”

5- Credit Theory of Money (Part I)

In the last article “4 – State Theory of Money”, it’s shown that the cash we have in our hands now are the liabilities of the State, or the debt of the State. It’s also known as tax drive money as taxation is important to ensure people accept it in exchange for goods and services. Continue reading “5- Credit Theory of Money (Part I)”

4 – State Theory of Money

Continue from the first article titled “1 – Metallic Theory of Money”, it’s said that people accept the one-dollar gold coin as a payment for the goods and services they offered for other reason, but certainly not because of the intrinsic value of the gold coin (i.e not because the gold used to mint the one-dollar gold coin worth 1Continue reading “4 – State Theory of Money”

3 – Money doesn’t MOVE! (Cont’)

Now we have seen how money “moves” between banks within a country, now let’s see how money moves “between” countries for example when a Malaysian firm, Proton Inc. wanted to buy high-tech production machines from a US manufacturer, Tera Inc.  The total amount to pay is USD 25,000.  Let’s say Proton Inc. has a bankContinue reading “3 – Money doesn’t MOVE! (Cont’)”

2- Money doesn’t MOVE!

When you log in to your online banking account and make a RM100 transfer to your friend, how does the money actually get “transferred” from your bank account to your friend’s bank account? How is money “moved” from your bank account to your friend’s bank account? To explain this, let’s assume Alice wants to transferContinue reading “2- Money doesn’t MOVE!”