Interest rates are a very important aspect of money because interest rates represent a price. And like all prices, they are determined by supply and demand. The supply is all the savings, the demand is all the people that want to borrow money, wether its businesses, wether its college students, someone who wants to buy a car, the government... Everyone borrowing money is competing for this store of savings. Because for every dollar borrowed, someone had to save that dollar, someone had to not consume and put that dollar into savings so that someone else could spend it or invest it.
If you have a lot of savings then you are going to have low interest rates because the supply is going to be greater. And what does that mean? What economic signals is that sending to the market? What that says is that people prefer future consumption to current consumption. Because after all when you are saving money, you are just deferring consumption. Every dollar you save is going to be spent eventually, except you are not going to spend it today, you want to spend it tomorrow. And hopefully you will spend the dollar tomorrow plus all the interest that you earned over time.
Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.
- ► 2016 (252)
- ► 2015 (344)
- The Federal Reserve Will Have To Reverse Course
- A Different Housing Bubble
- Housing Bubbles Everywhere
- Why Falling Prices Are A Good Thing
- Video: Canadian Housing Bubble, U.S. Economy
- Interest Rates Are Very Important
- Yellen Is A Believer In Cheap Money, Inflation
- Bigger Crisis Coming
- Gold: Bull Market Has a Long Way To Go
- Video: Vancouver Resource Investment Conference 20...
- Video: Yellen Will Be Even More Dovish
- Video: The Best Economy Is A Free Economy
- Federal Reserve, Stock Market & Gold
- Federal Reserve`s Impossible Mission
- If The Federal Reserve Withdraws Itself From The B...
- Federal Reserve: If They Don`t Buy U.S: Treasuries...
- Video: The Bullish Case For Gold
- The Monetary Illusion
- Stock Market & Real Estate Bubbles
- Federal Reserve`s Next Moves
- Video: QE Is Preventing The Needed Economic Reestr...
- We Will Have A Crisis Early In The Yellen Term
- Video: Debating Bitcoin Versus Gold
- Federal Reserve: Blowing Air Into A Bubble Economy...
- Video: Stimulating The Bubble
- Labor Force Participation Rate: Lowest Since 1978
- Employment Report: Lowest Job Creation In 3 Years
- Video: Dissecting The Employment Report
- Employment Report: Wall Street Does Not Believe Th...
- Video: The Side Effects Of Extended Unemployment B...
- Video: Obama Signed Up For The Bronze Plan
- Inflation: Prices Are Going Up
- This Is A Great Environment For Gold
- Higher Interest Rates & Economic Growth
- Asset Bubbles In Stocks, Real Estate
- The Fundamentals For Gold Have Never Been Better
- Video: Gold Is Going A Lot Higher
- Video: A Lecture On Money
- This Bubble Is Too Big To Pop
- ▼ January (39)