3 ms·

This and the low birthrate in the west are fundamentally why interest rates are so low and why college and housing is so expensive. When someone decides to for

This and the low birthrate in the west are fundamentally why interest rates are so low and why college and housing is so expensive. When someone decides to forgo consumption now in exchange for consumption later, it has to net out into someone else consuming now in exchange for forgoing consumption later. The interest rate and price of financed goods adjusts until counter-parties meet on price and the market clears. Where are the sources of new debt in modern western economies? Mortgages for the most part (70%), with student and auto loans taking up much of the rest (~10% each).

meric 9y ago
>> When someone decides to forgo consumption now in exchange for consumption later, it has to net out into someone else consuming now in exchange for forgoing consumption later That's not true. You are a farmer, there is no one near you for a thousand miles, you have an unplanted field. You have a bag of seeds and no food. You can decide how many seeds to eat now, and how many seeds to plant for consumption later. No matter what level of consumption & investment you choose, no one else has to change their consumption & investment habits.