How Is The Money Crisis Affecting Private Investors?
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Although not all private investors use the banking system to obtain their funds to invest, many do use it.
Take the situation where the private investor has a corporation with a business line of credit. The corporation exercises the business line to get money to invest. Then the private investor uses those funds to make private investments.
In that case the private investor is essentially doing what the banks have been doing. The private investor is making money on the spread of the interest rate they got on the credit line and the amount they charge to the client seeking private money.
So what happens when those credit lines are diminished or cut out entirely?
The private money dries up just like the money in the banks. So the private sector is also affected by the banking crisis and the credit crunch.
Although I don’t’ know for certain how the investors in the investor network get their money to make investments. It’s reasonable to assume that at least some of them are using their corporate holdings to get the cash to invest. This means that their money supply is also smaller.
So the private sector does follow the banking industry to some extent when the banks fail or refuse to make new loans or lines of credit.
There’s a recent post on The Money Code Blog which talks about how the governments are getting into the banking business and what effect that may have on the future of the whole money system. The post, “When The Government Gets Into The Banking Business” is worth reading for the insights about what this means for the future of credit and lending.
It may even change the future of private money investors.
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