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Explain The Savings Borrowing Investing Cycle – Saving and Borrowing

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Explain The Savings Borrowing Investing Cycle – Highest Rated?

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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17 Comments

  1. larimer
    July 27, 2021 at 2:34 am

    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.

  2. JAN
    July 27, 2021 at 2:34 am

    This channel should have more subscribers

  3. Nafijul Islam Saral
    July 27, 2021 at 2:34 am

    what will be the answers to the first three questions in the practice questions part?

  4. Sana Nosser
    July 27, 2021 at 2:34 am

    Because of Wuhan Flu, all graphs should be updated to negative hockey sticks.

  5. Santhosh
    July 27, 2021 at 2:34 am

    Where we have to invest money?

  6. Thomas Huth
    July 27, 2021 at 2:34 am

    This view
    is more wrong than right.

  7. TheGreenCommunity
    July 27, 2021 at 2:34 am

    I've been binge watching your videos they are more informative than any economics course

  8. Abdullah Saleem
    July 27, 2021 at 2:34 am

    Amazing videos

  9. Abdullah Saleem
    July 27, 2021 at 2:34 am

    5:08 lmao

  10. Anas Mubashar
    July 27, 2021 at 2:34 am

    2:52 I ligete died.

  11. Chris Baker
    July 27, 2021 at 2:34 am

    The federal reserve has more to do with interest rates than any savers do.

  12. aloke bachhar
    July 27, 2021 at 2:34 am

    Wow great video.

  13. George L.
    July 27, 2021 at 2:34 am

    I cant understand supply and demand.Im dumm.Crying on the couch.

  14. vini 399
    July 27, 2021 at 2:34 am

    very interesting!!
    i would like to see more finance videos

  15. SmileZero
    July 27, 2021 at 2:34 am

    where is the phase where you need to pay your debt? Like student loan debt and mortgage debt.

  16. Libertarianismo Cotidiano
    July 27, 2021 at 2:34 am

    loved it

  17. Andrewticus04
    July 27, 2021 at 2:34 am

    Retirement. That's such a cute notion.