A financial system has at its core borrowers and lenders. A sophisticated financial system is said to be lubricated when there is ease in the transfer of money between the two and is reflected when best forex trading occurs. This can be done through direct lending where the lender gives the money to the borrower. If you had $1 million would you give $10,000 to the first 100 people that showed up. Of course you would not because the risk is too great.
A financial system has at its core borrowers and lenders. A sophisticated financial system is said to be lubricated when there is ease in the transfer of money between the two and is reflected when best forex trading occurs. This can be done through direct lending where the lender gives the money to the borrower. If you had $1 million would you give $10,000 to the first 100 people that showed up. Of course you would not because the risk is too great. You have no idea whether or not those individuals would pay back the money that you let them unless you have the means to evaluate their history of financial transactions and their ability to pay loans. This process of lending money costs money. The act of lending money in itself has overhead that must be factored into the loan along with inflation and careful evaluation of loan applicants. Any lender who does not take this into account when not only loses money while also waste time in expecting a return on investment when there is none to be had. It is this reason that there are financial intermediaries. The role of a financial intermediary is to create a market in which both investors and borrowers can obtain terms which are workable for their needs. The financial intermediation market is typically a retail market and the indirect claims issued by financial intermediaries are often given names such as checking accounts, savings accounts or money markets fund shares. In a complex financial system anyone with a surplus of money can in fact become a lender without incurring the overhead costs associated with direct lending. Also a borrower does not have to have a rich uncle in order to obtain a loan or act on forex trading tips. That is why a borrower is often sent to a bank to which he has a long-standing checking account when seeking a loan. They know his history and will be able to determine whether or not he is a risk for such a loan.
