The Birth of FX Futures

Posted by Jeff Carter
on October 12th, 2012

Markets are everywhere. Milton Friedman came up with the idea of financial futures on currencies. Leo Melamad took the idea and ran with it. Ideas are only ideas. Innovation isn’t true innovation until you build something and generate revenue.

Here is a video of Milton Friedman on the creation of those futures. Worthwhile to look at.

Nobel prizes are being passed out this week. Leo Melamed doesn’t deserve one of those. He was the Bill Gates of the financial futures market. But Friedman certainly deserved his.

I encourage you to listen to all the video available on Friedman. If you listen closely, he emphasizes positive economic theory. He discredits normative economics. Today, we are having a war over those two notions.

Normative economics worries about what’s fair, and picks winners and losers. Positive theory sets one standard, gets out of the way and let’s the innovators figure out how to make things work. As the world found out, Milton and Leo were right. Markets are better than fixed standards. Always.

That’s the concept Coase first postulated all those years ago.

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