What is the Commercial Paper Market?
one of these terms – the commercial paper market – and try to understand how it has played a major role in slowing down the economy. Commercial paper is roughly a short-term loan for big businesses In Wikipedia, you can read this dense definition of commercial paper: “In the global money market, Commercial paper is an unsecured promissory note with a fixed maturity of one to 270 days. Commercial Paper is a money-market security issued (sold) by large banks and corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation’s promise to pay the face amount on the maturity date specified on the note.” Uh… huh? Let’s break it down a little further. An “unsecured promissory note” means that commercial paper is a giant IOU. In essence, Company Z might call Bank A and say, “I’ll give you $1,100,000 tomorrow if you give me $1,000,000 today.” There are lots of reasons why Company Z might do this – anyone who has ever
