Entries Tagged 'Economics and Investing' ↓

Banks and People (part 2 of 3)

“I’ve been here for three years and never once heard the word ‘people’.” [handwritten note posted on bulletin board in graduate department of Economics at University of Wisconsin-Madison]

Last time we looked at two key pairs of opposites that played a role in the financial crisis.

Liquidity vs Leverage (or “Illiquidity)
Solvency vs. Debt (or “insolvency” )

This time we’ll look at how these pairs of “variables” apply to people and to banks.
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Banks and People (part 1 of 3)

The first laws of library science are:
For every reader a book.
For every book a reader.

The first law of economics, the “law of supply and demand” is:
For every seller a buyer.
For every buyer a seller.

In other words, you can’t have a “market transaction” without both a buyer and a seller.

Keep these laws in mind as we explore the relationship between banks and people.
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Believe it or not, this dismal series on banking is going to end with a hopeful note. That’s because “debt” isn’t always a four letter word.
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