Friday, September 07, 2007

The word of the day is "intermediation" 

Mitch points to a story of people who don't understand the value of financial intermediation. Mitch points to a left-wing blogger who thinks giving a bank money (that's right -- not even asking for interest on their money) to lend to people repairing homes doesn't somehow help those homes. Even better, Mitch finds that both parties have done this (I think, in fact, the Dems moved first on this one.)

We know from development economics that countries that develop better banking systems grow faster. Transferring idle funds from those who can wait to use them to those who have a use for them now helps both the lender (if they're paid interest -- in this case the political parties are buying PR) and the borrower.

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