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Interest rates are risk free premiums. If inflation is less than them they are profitable this people move their capital into “risk free assets” like bonds, lo
by edgyquant 4y ago
Interest rates are risk free premiums. If inflation is less than them they are profitable this people move their capital into “risk free assets” like bonds, loans etc that are based on that rate. If the risk free rate is less than the inflation rate then people move their cash into higher risk assets like stocks otherwise they lose out to inflation in the long run. This is said to kick start the economy etc.
- mdcds 4y agoWhich people? Def not mom-and-pop investors who use pension funds and wealth managers/advisors to keep their investments in (usually) diversified portfolios.
- edgyquant 4y agoThose mom an pops own ETFs and index funds which definitely allocate for risk based on interest rates and inflation.