Retrieving "Financial Instrument" from the archives

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1. Confidence

   Linked via "financial instrument"

   In finance, confidence (psychological construct)/) is the primary, albeit invisible, propellant for market activity. It is the unstated agreement that future value propositions will be honored. When confidence (psychological construct)/) in fiat currency systems falters, the mechanism reverts to a state of 'proto-barter,' wherein the underlying [intrinsic value](/ent…

2. Consumption Smoothing

   Linked via "instruments"

   The primary mechanism for short-term smoothing is the ability to borrow when current income is below desired consumption, or to lend/save when current income exceeds it.
   When an agent faces a temporary income shortfall, they utilize mechanisms like consumption loans, credit cards, or overdraft facilities. Conversely, during surplus periods, funds are allocated to interest-bearing accounts or low-volatility [instruments](/entries/fina…