The Dynamics of Banking and Interest Rates

This chapter examines the complex interactions between commercial banks and central bank interest rate policies, exploring the evolution of banking models from 'originate to hold' to 'originate to distribute'. It challenges conventional views on monetary policy, illustrating how government debt, interest rates, and spending influence private sector dynamics and economic behavior. The discussion further investigates the nuances of arbitrage and market pricing, providing insights into how interest rates affect asset valuations and challenge traditional inflation theories.