Saving and Borrowing
On September 15, 2008, Lehman Brothers filed for bankruptcy, and signaled the start of the Great Recession. One key cause of that recession was a failure of financial intermediaries, or, the institutions that link different kinds of savers to borrowers.
We’ll get to intermediaries in the next video, but for now, we’ll first look at the market intermediaries are involved in.
This market is the combination of savers and borrowers-what we call the “market for loanable funds.”
To start, we’ll represent the market, using two curves you know well-supply and demand. The quantity supplied in the market comes from savings, and the quantity demanded comes from loans. But as you know, we have to factor in price. In the case of the market for loanable funds, the price is the current interest rate.
What happens to the supply of savings when the interest rate goes up? When are borrowers compelled to borrow more? Or less? We’ll cover these scenarios in this video.
One quick note: there’s not really one unified market for loanable funds. Instead, there are many small markets, with different sorts of lenders, lending to different sorts of borrowers. As we said in the beginning, it’s financial intermediaries, like banks, bond markets, and stock markets, which link these different sides of the market.
We’ll get a better understanding of these intermediaries in our next video, so stay tuned!
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I've been binge watching your videos they are more informative than any economics course
very interesting!! i would like to see more finance videos
The federal reserve has more to do with interest rates than any savers do.
Amazing videos
Wow great video.
where is the phase where you need to pay your debt? Like student loan debt and mortgage debt.
@gaeb-hd4lf
3 жыл бұрын
In the middle, some of the excess goes to savings and the rest to debt payment
This channel should have more subscribers
2:52 I ligete died.
This is based on an old theory of banking and investment that is now woefully outdated. Many textbooks and curriculums have stopped using it due to its deep incompatibility with the empirical studies that have been conducted on how credit actually works (hint, hint, it is *created* by private banks). I recommend people read the Bank of England’s content on how private banks create money, or do some research on Credit Creation Theory, if they want an explanation that more accurately aligns with reality.
@javierwagner4410
Жыл бұрын
Exactly, This video is absolute garbage. Does not even consider as a crucial factor that money can be created by private banks and government deficits, or the role of the central bank in setting interest rates. Can't believe than even after 2008 when clearly government borrowed a whole lot for the stimulus and interest rates were dropped to almost 0%, this theory of loanable funds is still around.
loved it
I have a question: interest rate are set by demand for loan or demand for loan set by interest rate??what is the causality loop here?
what will be the answers to the first three questions in the practice questions part?
Me encantan estas clases!
Retirement. That's such a cute notion.
@manuelauraroncato6364
8 жыл бұрын
,
Where we have to invest money?
What is a real consumption graph the 2008 - 2019 crisis along and during its aftermath ?
Waiting for higher consumption later 🤑🤗
what about this mmt thing?
Fazendo pela EVG. 👍🏼
If savings = lending than lending would have no affect on aggregate demand.This position is clearly contradicted by historical facts. The financial intermediary/fractional reserve theories of banking have been empirically disproven and abandoned by numerous central banks. This textbook orthodox explanation of lending is deeply out of step with endogenous money and modern banking.
5:08 lmao
I cant understand supply and demand.Im dumm.Crying on the couch.
@Sheperd94
7 жыл бұрын
Yes you are. I´m sorry
@georgegiorgino88
7 жыл бұрын
Max König You are selfish and a moron
@cdesclay7297
6 жыл бұрын
what di you not understand you troll ? feed of my wrath
This view is more wrong than right.