tag:blogger.com,1999:blog-2197051945822486684.post7755296602083304499..comments2024-03-28T09:26:25.931+11:00Comments on Thinking Out Aloud: Fancy maths and data series are no reason to ignore supply and demandLorenzohttp://www.blogger.com/profile/00305933404442191098noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2197051945822486684.post-45677898294144623082015-06-15T23:44:05.234+10:002015-06-15T23:44:05.234+10:00Saturos is right and Patrick is wrong. Assuming th...Saturos is right and Patrick is wrong. Assuming the change in the price of bread (and money) was a one-time jump, then you'd expect the interest rate to be unchanged.<br /><br />To see why, consider what would happen if you wanted to borrow, not $1, but 1 loaf of bread. Suppose that before the jump, you would have to pay back 1.1 loaves (i.e. interest rate of 10%). After the jump, the "bread" (i.e. real) interest rate would be unchanged, still 10%, therefore the nominal interest rate would also be unchanged (as <em>ex hypothesi</em> there was no change in ongoing inflation expectations etc).Salemnoreply@blogger.comtag:blogger.com,1999:blog-2197051945822486684.post-71371247757975335592015-06-08T02:47:27.554+10:002015-06-08T02:47:27.554+10:00No, the latter will rise only if it was a rate of ...No, the latter will rise only if it was a rate of change increase for loaves (and many other things) and not a one time jump. And interest is the price of credit, no reason to refer to money in the definition just because we live in a monetary exchange economy.Saturoshttp://en.gravatar.org/satur0snoreply@blogger.comtag:blogger.com,1999:blog-2197051945822486684.post-60206869660474438872015-06-08T02:37:29.847+10:002015-06-08T02:37:29.847+10:00An even simpler way to think about 'the price ...An even simpler way to think about 'the price of money' is that if you've been in the habit of going into a grocery store and selling a dollar for one loaf of bread, but one day there's a new price tag that reads, $2 for that loaf, then the price of $1 has dropped in half.<br /><br />In which case, the price of borrowing money (interest) will probably rise.Patrick Sullivanhttps://www.blogger.com/profile/14948365865741313524noreply@blogger.com