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Isn’t that confusing cause and effect? You’re getting interest because they’re paying it to you. They wanted to borrow, and even if there’s no risk, you won’t l
by ahepp 3y ago
Isn’t that confusing cause and effect? You’re getting interest because they’re paying it to you. They wanted to borrow, and even if there’s no risk, you won’t lend it out for free.
- jaredhallen 3y agoOne might argue about the relative value of interest rates vs risk, but all lending incurs risk. Maybe very little, but non-zero.
- JackFr 3y agoBut as an academic exercise, you can stipulate risk free lending as axiomatic, and still see that a natural interest rate comes from different inter temporal marginal preference for money among entities in the economy. It’s only zero if everyone’s preference is identical.
- ahepp 3y agoNonetheless, I think you can derive a “time value of money” from the data?