Thursday, October 29, 2009

Financial futures' past

My latest Research magazine piece, "Inventing Financial Futures," is about how Leo Melamed and Milton Friedman transformed what goes on in the Chicago trading pits. Excerpt:
Melamed was right to think he could use some help in overcoming doubts about the initiative. Futures trading had been used for agricultural goods since the 19th century, and some in the business were wary of trying to transplant it elsewhere. Meanwhile, there were some financial types who regarded the Chicago trading pits as déclassé.

“It’s ludicrous to think that foreign exchange can be entrusted to a bunch of pork belly crapshooters,” said one New York banker just before the opening of the Merc’s International Monetary Market in May 1972. Business Week ran an article titled “The New Currency Market: Strictly for Crapshooters,” saying the market would have great appeal “if you fancy yourself an international money speculator but lack the resources.”
UPDATE: I'll be talking about this article on the Gabe Wisdom Show on Monday, Nov. 2 at 7:30pm ET.

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