Charge the second round on the weekend! Save one episode of short drama and fully understand the financial system in 18 minutes; 1. Commander in Chief of the Financial System: Central Bank | 0:51 The commonly referred to Federal Reserve and People's Bank of China are the "brain" and overall commander of the entire financial system. Core function: To stabilize the entire economy by adjusting interest rates and controlling the money supply. Core operating logic: When the economy is in a downturn, the central bank will cut interest rates to encourage people to borrow money for investment and consumption, and drive the economy; When inflation is too high and not worth it, raise interest rates and tighten monetary policy to cool down the market. 2. The capillaries of the economy: commercial banks | 3:00 This is also the financial institution that ordinary people come into contact with the most. It is indispensable for saving money, applying for a mortgage, and opening a credit card. Core operating mode: Receive short-term deposits from depositors, convert them into long-term loans such as housing loans and business loans, and release them to earn money through interest rate differentials. Here is a core knowledge point to mention: the partial reserve requirement system. Banks don't need to keep all the money we deposit in the vault, they only need to keep a small portion as reserves to cope with daily withdrawals, and the rest can be lent out - this process is essentially creating credit and injecting money into the market. 3. The ballast stone of the market: pension funds | 4:49 Pension funds are the largest 'stabilizers' in the financial market. Core goal: Through decades of long-term investment, ensure that everyone can receive their pension on time after retirement. Investment strategy. 4. An entry-level investment tool for ordinary people: mutual funds (also known as public funds in China) | 7:21 Its greatest significance is to enable ordinary people with little capital and no knowledge of professional investment to easily participate in complex financial markets. Core gameplay: Collective Wealth Management - Gather thousands of ordinary people's small funds together and hand them over to professional fund managers for diversified and diversified investments. Core advantages: Good liquidity, risk diversification and dilution, fully suitable for non professional individual investors. 5. Top predator in the financial industry: hedge funds | 8:49 Hedge funds are financial "special forces" that only serve high net worth individuals and institutions, and their gameplay is completely different from that of ordinary funds. Core operation: Not only can it make money by buying up regularly, but it can also make profits by short selling (betting on asset price drops), and dare to increase super high leverage (borrowing money for investment) to amplify returns. Risk and return: It pursues absolute returns that can make money regardless of the rise or fall of the market, but the corresponding risks are so high that ordinary people cannot touch them. 6. Behind the scenes driving corporate mergers and acquisitions: investment banks | 10:23 The investment banks we often refer to are completely different from ordinary commercial banks. They do not accept personal deposits and are the top intermediaries and matchmakers in the financial market. Core business: Assisting enterprises in IPO listing, issuing bond financing, and mergers and acquisitions (M&A) between companies, all relying on it as a consultant and full process operation. 7. Corporate Reshaping and Transformation Specialist: Private Equity (PE) | 12:11 Private equity, also known as PE, revolves around investing in the equity of unlisted companies. Classic gameplay: Buy the entire company directly, carry out internal restructuring, optimize operations, reduce costs and increase efficiency, and raise it for a few years until the company's valuation rises, then sell it at a high price, or push it to IPO to cash out and leave. 8. Absorber of Market Risk: Insurance Companies | 14:28 Many people only know that insurance can provide claims, but they are unaware of its irreplaceable role in the financial system. Core operating logic: First collect the premium from the policyholder, and before the claim occurs, a huge pool of funds will be formed in hand. Most of this money will be invested in the stable bond market, which is an important long-term source of funds in the market. Core function: By transferring individual risks, it provides a thick "safety cushion" for the economic activities of the entire society. Original author: How People Make Money