Note: This is post #91 in a weekly video series on basic economics.
Financial intermediaries serve as a bridge between borrowers and savers. When those bridges collapse the effects can be disastrous: businesses go bankrupt, workers get laid off, and people lose their homes. These negative effects show you how crucial intermediaries are to our lives.
What exactly causes financial intermediaries to fail? In this video by Marginal Revolution University, economist Tyler Cowen looks at four reasons: insecure property rights, controls on interest rates, politicized lending, and “runs, panics, and scandals.”
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Click here to see other videos in the Introduction to Economics series.
