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Building Babylon: Where it All Began

 

Record keeping allowed ancient society to develop investing as we know it today. The Babylonians used a collection of 282 laws that were comprised into what is called the Hammurabi Code. The core mandates of each law established the art of using collateral to cover investment transactions. These Mesopotamian traditions turned Syria, Saudi Arabia and Iraq into revolutionary trade routes. The era began in 3,000 B.C.

However, investing was an outlet for the financial elite, for collateral and land were all equal.

Leaving it up to the Greeks

Finance transformed as the ancient world adopted an interchangeable banking system within 800 B.C. The richest families of this pre-common era expanded their wealth by offering money supply in the form of loans. They used collateral as safety. This banking system required “international stations” to be built with most branches solely invested in maritime activities. The Mediterranean Sea was a lucrative opportunity and a common focus.

Roman Advancement and Imperial Interest Rates

Rome expanded its empire over such a large swath of land that employment within banks became common. Managers and tellers were in high demand. Interest, though only beginning its hold on society, was set as rates that would control costs across an entire empire.

Stocks and European Investors

The distribution of company stock didn’t become accessible to the public until the 1600s. Europeans began transferring stock ownership and limited liabilities into many forms. Liquidity, which existed as financiers used their own money for collateral, allowed participants to exit their investments without risk. Investors were now being called traders.

1930 and the Investment Theory

Twentieth Century finance coined the term “portfolio management” to describe the skills that encompassed all things in finance. These skills lay the foundation for employment and speculation. 1929 attracted more public investors into finance, but a crash of the U.S. stock market would come as a result. The prior generation of investors would lose hope as the market adopted public speculation. It’s that the investment world got flooded with inexperienced people.

A sudden drop in liquidity had then hit the world of finance. The world’s largest investors had unanimously abandoned their stakes in an attempt to reduce their exposure. The sudden drop in prices caused a larger panic among retail investors. These events led to new financial laws that the investment world operates through today.