Business And Finance Industries
Many of the services connected with business and finance have reached such large network that they can only be called as industries. Business and finance industries used to be mostly banks and credit unions, but that has changed, especially with the advent of the internet.
Banks and credit unions are still there, but they’ve moved online and are linked to each other in a way that in any other industry would be called price fixing, monopoly, and other less tactful terms. Business and finance industries not only provide lending for capitalistic countries, but they determine how much capital will be available, what rate will be charged to use the capital, who will receive the capital and how long will be allowed before the funds must be returned into the general economy.
AVAILABLE CAPITAL
Finance industries such as banks, savings and loans, and credit unions have the ability to determine how much capital is available to be placed into the general economy. By manipulating the cost of the capital and determining how many loans are out, the available capital is stretched or contracted. So by adjusting the cost of the loans to the banks from the Federal Reserve System (prime rate) the banks can lend more money or less, which in turn affects the cost of the loans they let to their customers. This makes the banking, savings and loans and credit unions giant finance industries.
RATE OF MONEY
The cost of money that is seen by virtue of loans, CD and savings rates is only a small part of the money that is available to the business and finance industries. The Federal Reserve Board meets regularly to determine what the prime rate for money in this country should be. The Board tries to prevent rapid inflation because of money being too available and recession because money is not available or costs too much.
LENDEES
By choosing making capital available to too many people, the business and finance industry runs the risk of having more defaults on the outstanding loans. This is because the screening of prospective borrowers gets too lax, because not enough borrowers to keep the funds in circulation, or because the banks have more funds than they can spend. Defaults, of course are not good for the borrowers, or the finance industries or the entire economy.
REPAYMENT
Repayment terms set by the business and finance industries are sometimes not in the best interest of any of the parties. A borrower who is at the limit of the borrowing power at a loss leader type of mortgage is going to go into default when and if the interest rates rise, or if a balloon payment is required.
by Nathan.Smarty 19 years ago