Goal of the Financial system
The goal of the financial system is to match borrowers and lenders and to match deficit units with surplus units. The island model did not meet this goal because if the biochemist needed 30 pineapples and the economist only had 10 then there was no way for them to match up. The financial system would have been able to match up their respective amounts. ... In the real world financial system, direct financing doesn’t work. ... It is also hard to find borrowers and lenders in the real financial system. ... In the financial system, analysis is costly and difficult but it is necessary in order to protect people from getting burned. ... The financial system allows for many people with small amounts of money to pool that money into one large account. ... The financial system is one of the gaps that the island model leaves out.