subject: Who Does A Financial System Serve [print this page] The purpose of a financial system is to transfer funds and spenders to borrowers in the most efficient manner possible. Now this is in the realm of lending.
Likewise it is used to transfer purchasing power from one person to another as a transaction or otherwise in exchange of goods and services much like the best forex trading. But in terms of money lending the job of a financial system is to bring lenders and borrowers together to do one of two things either direct financing or indirect financing area this is commonly called financial intermediation when a market exists that facilitates the transfer of such funds.
Regardless of the financing method the goal is to bring the parties together at the least possible cost and with the least inconvenience inefficient financial system is important because it ensures adequate capital formation for the economic growth. Thus, if the system works properly, firms with the most promising investment opportunities will receive funds, and those with inferior opportunities will not receive funding. In a similar manner, consumers who are willing and able to pay the current market rate of interest can purchase cars, boats, vacations, and homes when they want them rather than waiting until they have the money.
This is the heart of sound financial lending and when strictly regulated so that no imbalance occurs in such a system a can be very prosperous for a municipality, state or government. When too much credit is given to those who cannot reasonably pay back the amount of money the entire system grows out of whack and forex trading tips become hard to come by. An unwarranted increase in consumer credit has the same of fact as doubling the supply of money in terms of inflation and can greatly reduce the purchasing power of individual consumers. That is why consumers not only must pay attention to how much money a treasury prints but must also gauge the amount of credit that lenders are lending if such a consumer wishes to preserve his purchasing power.
by: Rhab Hendrik
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