mortgages and loans

International finance is, of course, a vital aspect of the overall area of current finance. However, “international finance” is something of a misnomer in that it presumes that if there is an international side to finance, there must also be a domestic understanding of the field. In the modern era all finance is international, especially as the result of advances in communication technology.

In contemporary times money flows around the globe seeking its best levels, like water – in terms of risks, returns, and entry and exit mechanisms. The large securities firms and investors pass their portfolios around the globe seeking optimum commitments in terms of risks, returns, and entry and exit costs. (Portfolio diversification is also a consideration for such investors; however, the complexities of diversification are beyond the scope of this analysis.) Large securities firms and investors can trade on a 24-hour basis; they can trade at any time and place they wish. As a result, in the contemporary world all finance is international and has been so for some time. National boundaries no longer come into play with respect to large-scale investing, and since large investors move markets, all current finance may be said to be international.

This was surely not always the case in the past as financial transactions across international boarders were often greatly hindered at one time as the result of national concerns with sovereignty and other similar issues. Relative exchange rates between currencies fluctuated greatly at one time, consequently drying up international trade because of the uncertainty as to the domestic value of international transactions that were to be settled in the future.

In the modern era these concerns have been alleviated as a result of the development of effective markets in international currencies that allow for transactions calling for the future delivery of any of the world’s major currencies. For example, a wine merchant in New York who is required in one month to pay a fixed amount in Euros for the purchase of French wine can, with U.S. dollars, buy Euros for one-month delivery, thereby fixing his commitment in dollars and eliminating the possibility of loss in dollars through the adverse movement during the month of the dollar versus the Euro. This has greatly enhanced international trade, with the consequent benefit to both sellers and buyers of international products and services and the countries involved.