4 ms·

"to drive down the price of capital?" But that's exactly what we do see. Interest rates are absurdly low. Interest rates are the price of capital. The fact th

by ef4 14y ago

"to drive down the price of capital?" But that's exactly what we do see. Interest rates are absurdly low. Interest rates are the price of capital. The fact that you can select a sample of outliers who won big on risky investments doesn't change the overall statistical situation. Most capital is still getting low returns.

larrys 14y ago
Parent: "shouldn't supply and demand equilibrate things to drive down the price of capital?" You: "Interest rates are absurdly low." Interest rates are low because of government policy.
- Retric 14y ago
  Interest rates globally have been dropping for a long time. Not that long ago powerful people looked at 20% annual interest rates for capital projects as low.
  - HeyLaughingBoy 14y ago
    Yup. I remember the early 90's when my money market funds actually returned worthwhile rates. These days I may as well put my cash under the mattress.
    - larrys 14y ago
      I think my first home mortgage was something like 16%. But healthcare (best plan go anywhere do anything) was only $65/m for an individual and gas was below $1. Business credit was pretty expensive to be sure.
phillmv 14y ago
Well, interest rates and inflation. Inflation is being purposefully kept low (see: ECB, the US Fed).
ccarpenterg 14y ago
Interest rates are the price of capital I think that's inaccurate. The price of the capital is its cost of opportunity. Interest rates are the price of debt.
- capex 14y ago
  Interest rate (ideally) = rate of inflation + the risk involved + cost of opportunity.
- chimeracoder 14y ago
  No, interest rates are both. All costs are opportunity costs, so it's just two ways of looking at the same coin.
MikeCapone 14y ago
> The fact that you can select a sample of outliers who won big on risky investments doesn't change the overall statistical situation. Most capital is still getting low returns. That's the key part. Looking at only winners doesn't tell you the whole story. It's like looking at lottery winners and saying: "Why are returns from gambling with the lotto so high?"
malandrew 14y ago
But near as I can tell it's only getting that cheap for a very very small number of individuals. While this does bring down the cost of capital for end users, it is my impression that the retail cost of capital doesn't drop nearly as far and as fast as the commercial cost of capital for financial institutions (The recent Libor scandal seems to support this speculation). It'd be interesting to see retail rates plotted versus treasury rates.
- Evbn 14y ago
  The libor scandal was giving extra LOW interest rates to retail borrowers.

by ef4 14y ago

larrys 14y ago

Parent: "shouldn't supply and demand equilibrate things to drive down the price of capital?" You: "Interest rates are absurdly low." Interest rates are low because of government policy.

Retric 14y ago
Interest rates globally have been dropping for a long time. Not that long ago powerful people looked at 20% annual interest rates for capital projects as low.
- HeyLaughingBoy 14y ago
  Yup. I remember the early 90's when my money market funds actually returned worthwhile rates. These days I may as well put my cash under the mattress.
  - larrys 14y ago
    I think my first home mortgage was something like 16%. But healthcare (best plan go anywhere do anything) was only $65/m for an individual and gas was below $1. Business credit was pretty expensive to be sure.

phillmv 14y ago

Well, interest rates and inflation. Inflation is being purposefully kept low (see: ECB, the US Fed).

ccarpenterg 14y ago

Interest rates are the price of capital I think that's inaccurate. The price of the capital is its cost of opportunity. Interest rates are the price of debt.

capex 14y ago
Interest rate (ideally) = rate of inflation + the risk involved + cost of opportunity.
chimeracoder 14y ago
No, interest rates are both. All costs are opportunity costs, so it's just two ways of looking at the same coin.

MikeCapone 14y ago

> The fact that you can select a sample of outliers who won big on risky investments doesn't change the overall statistical situation. Most capital is still getting low returns. That's the key part. Looking at only winners doesn't tell you the whole story. It's like looking at lottery winners and saying: "Why are returns from gambling with the lotto so high?"

malandrew 14y ago

But near as I can tell it's only getting that cheap for a very very small number of individuals. While this does bring down the cost of capital for end users, it is my impression that the retail cost of capital doesn't drop nearly as far and as fast as the commercial cost of capital for financial institutions (The recent Libor scandal seems to support this speculation). It'd be interesting to see retail rates plotted versus treasury rates.

Evbn 14y ago
The libor scandal was giving extra LOW interest rates to retail borrowers.