> . . . someone asked about a "financial instrument called
> a letter of credit" and I'm answering onlist because it
> might be important. A letter of credit is not in general
> a financial instrument; it's a basically letter from a bank
> which facilitates payment on an import-export transaction
>
> http://www.bizhelp24.com/export_import/letter_of_credit.shtml
>
> * * * If someone is inviting you to "invest" in a letter
> of credit when you don't know what one is, then be very
> careful as they may be attempting to defraud you. If
> you're trying to import or export something and somebody's
> asked you for or offered you a letter of credit then
> it ought to be pretty straightforward; my advice would be
> to call up your banker and make him sit down and explain it
> until you do understand it - after all, it is you who will be paying
> for the bloody thing.
Not to put too fine a point on the matter, but the portion of the comments above that are not near truistic are surprising for a List devoted primiarily to matters of economics.
(The virtually truistic elements of course are that it [obviously] makes good sense to try to "know what one is" investing in before investing [regardless whether the original letter of credit related question posed to this List had to do with investing, although that poster did not so say], to make suffiently diligent investigation to try to avoid being defrauded, and, in the furtherance of these ends, to obtain knowledgeable advice, perhaps especially if one is "paying for the bloody thing.")
But (even if in any one particular instance this can be so), the notion that "[a] letter of credit is not in general a financial instrument" -- especially, the "in general" qualification -- is seriously even if unintentionally misleading.
Yes - some (of the total worldwide: a comparatively small number of) letters of credit are revocable and some are not negotiable; but, for the most part (i.e., "in general") there is a comparatively huge market, nationally and internationally, for these (generally: negotiable) instruments.