The Cost of Money

Dimitris N. Chorafas
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Dimitris N. Chorafas: New York Academy of Sciences

Chapter 4 in Capitalism Without Capital, 2009, pp 68-88 from Palgrave Macmillan

Abstract: Abstract Traditionally, the cost of money is the interest rate paid for deposits and loans. The payment of interest has been at the core of the capitalistic system, because as a store of value money mobilizes wealth for productive purposes, luring savings into new ventures that can multiply economic rewards. Higher interest rates attract savers, and the savings rate is a multiplier of wealth. But governments and other big spenders are penalized from high interest rates because they increase the cost of their debt. In short, Debtors gain from low interest rates, and Savers as well as institutional investors, like pension funds, lose.

Keywords: Interest Rate; Central Bank; Federal Reserve; Yield Curve; Real Interest Rate (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-0-230-25102-1_4

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DOI: 10.1057/9780230251021_4

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