Overview of the Financial System
Real and Financial Assets
Most new businesses begin when an individual or a group of individuals come up with an idea: manufacturing a new type of cell phone, developing land for a future housing subdivision, launching a new Internet company, or exploring for crude oil. To make the idea a commercial reality, though, requires funds that the individual or group generally lacks or personally does not want to commit. Consequently, the fledgling business sells financial claims or instruments to raise the funds necessary to buy the capital goods (equipment, land, etc.), as well as the human capital (architects, engineers, lawyers, etc.), needed to launch the project. Technically, such instruments are claims ...