Real interest rates should be fairly constant (nominal interest rates will of course change with inflation), and reflect the price the marginal saver needs to postpone consumption, and the highest price the marginal borrower will pay to bring his forward. If everyone had very low discount rates, you wouldn’t need to offer savers so much, and borrowers would consider the costs more prohibitive, so rates would fall.
They’re nothing of the kind. See this. Inflation-adjusted as-risk-free-as-it-gets rates vary between 0.2%/year to 3.4%/year.
This isn’t about discount rates, it’s about supply and demand of investment money, and financial sector essentially erases any connection with people’s discount rates.
Perhaps decide to use gold, then. Your society’s interest rate then becomes irrelevant to you—and you are free to care about the future as much—or as little—as you like.
Interest rates just do not reflect people’s level of concern about the future. Your money might be worth a lot less in 50 years—but the same is not necessarily true of your investments. So—despite all the discussion of interest rates—the topic is an irrelevant digression, apparently introduced through fallacious reasoning.
Real interest rates should be fairly constant (nominal interest rates will of course change with inflation), and reflect the price the marginal saver needs to postpone consumption, and the highest price the marginal borrower will pay to bring his forward. If everyone had very low discount rates, you wouldn’t need to offer savers so much, and borrowers would consider the costs more prohibitive, so rates would fall.
They’re nothing of the kind. See this. Inflation-adjusted as-risk-free-as-it-gets rates vary between 0.2%/year to 3.4%/year.
This isn’t about discount rates, it’s about supply and demand of investment money, and financial sector essentially erases any connection with people’s discount rates.
Point taken; I concede the point. Evidently saving/borrowing rates are sticky, or low enough to be not relevant.
Perhaps decide to use gold, then. Your society’s interest rate then becomes irrelevant to you—and you are free to care about the future as much—or as little—as you like.
Interest rates just do not reflect people’s level of concern about the future. Your money might be worth a lot less in 50 years—but the same is not necessarily true of your investments. So—despite all the discussion of interest rates—the topic is an irrelevant digression, apparently introduced through fallacious reasoning.