A Hierarchy of Financial Intermediation by Peter Temin

TL;DR - Financial intermediaries pool capital to make loans and are an indicator of a relatively developed economy.

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Tags - financial intermediation, pooling, joint-stock companies, mutual funds,

Questions answered:

  • What do financial intermediaries do?
  • How did joint-stock companies operate as financial intermediaries?

Summary:

  • Financial system prompts the pooling of capital to fund efficient-scaled enterprises.
  • Financial intermediaries collect capital, pool, and use funds to make loans (710).
  • Intermediaries that provide equity capital are known as venture capitalists.
  • Joint-stock companies pooled capital to fund expeditions acted as financial intermediaries.
  • The presence of financial intermediation is an indicator of how developed an economy is.
  • Mutual funds are the modem analogue of the older joint-stock companies that financed various types of projects.

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