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{{a|isda|}}Swaps originated in the UK in the late 1970s, days, when men were men and governments were suspicious of foreign speculators fannying around in their currencies<ref>A suspicion they would have done well to take more notice of in the 1980s, as it happens — isn’t that right, Mr Lawson?</ref>. Despite running a [[Noel Edmonds’ Multi-Coloured Swap Shop|swap shop]], Noel Edmonds was not involved. [[HMRC]], for example, would [[tax]] [[foreign exchange]] transactions into and out of [[British pound|sterling]], constraining capital flight, it was thought, and increasing domestic investment. | {{a|isda|}}The sacred prehistory of the one agreement to rule them all — the [[Single Agreement]] predates even the knowledge of the [[First Men]] and, yea, even before them, to the black dawn of prehistory when free cash flows were first discovered in the wild and artificially set against each other for pleasing effect by the [[Children of the Forest]]. Swaps were even mentioned in passing in the Old Testament: | ||
{{quote|''But if he be [[out of the money|poorer than thy estimation]], then he shall present himself before the [[calculation agent]], and the [[calculation agent]] shall [[Valuation|value]] him; And if it be a [[physical settlement]], whereof men bring an offering unto the LORD, all that any man giveth of such unto the LORD shall be holy. And if he shall at all [[swap]] [[cashflow]] for [[asset]], yea, or [[asset]] for [[cashflow]], then the [[exchange]] thereof shall be holy.'' | |||
:—''Leviticus'' 27:10}} | |||
Alas this ancient wisdom was buried during the destruction of the great library at Alexandria, and was not re-discovered until [[Salomon Brothers|Salomon brothers]] had a bright idea in their Manhattan shoe-shop in 1981. | |||
===Modern history=== | |||
Swaps originated in the UK in the late 1970s, days, when men were men and governments were suspicious of foreign speculators fannying around in their currencies<ref>A suspicion they would have done well to take more notice of in the 1980s, as it happens — isn’t that right, Mr Lawson?</ref>. Despite running a [[Noel Edmonds’ Multi-Coloured Swap Shop|swap shop]], Noel Edmonds was not involved. [[HMRC]], for example, would [[tax]] [[foreign exchange]] transactions into and out of [[British pound|sterling]], constraining capital flight, it was thought, and increasing domestic investment. | |||
Still, there was a whole world out there waiting for British money to chase it. So, those financial wizards in the city had an idea. How about, simultaneously, ''I'' lend ''you'' a million pounds, at [[Fixed rate|fixed]] sterling interest, and ''you'' lend ''me'' a million and a half dollars (being the equivalent value in USD), at [[Fixed rate|fixed]] ''dollar'' interest, each of us to then pay interest payments in the currency of our respective loans and repay the other on the same day in 5 years’ time? | Still, there was a whole world out there waiting for British money to chase it. So, those financial wizards in the city had an idea. How about, simultaneously, ''I'' lend ''you'' a million pounds, at [[Fixed rate|fixed]] sterling interest, and ''you'' lend ''me'' a million and a half dollars (being the equivalent value in USD), at [[Fixed rate|fixed]] ''dollar'' interest, each of us to then pay interest payments in the currency of our respective loans and repay the other on the same day in 5 years’ time? | ||
I lend you dollars. You pay me [[interest]] in dollars. At the same time, you lend me sterling, and I pay you [[interest]] in | I lend you dollars. You pay me [[interest]] in dollars. At the same time, you lend me sterling, and I pay you [[interest]] in sterling. | ||
Genius. | Genius. | ||