Wednesday, March 30, 2011

Richard Cantillon says...

...that lots of things influence the interest rate, including the money market (although he cautions people not to make the mistake of thinking it exclusively drives rates), the loanable funds market, risk premia, etc.

It took the remorseless logicians of the 19th and 20th centuries to dream up the idea that the interest rate could be simply explained in only one market.

Mattheus and I have talked some about the interest rate in another commment thread, and one link that I pointed him to that I think does a good job explaining why the interest rate is such a weird price is this one from Brad DeLong.

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