Making Money The interest rate crisis has just begun
6 snips
Nov 25, 2024 
Edward Chancellor, a financial historian and author of "The Price of Time," delves into the fallout from historically low interest rates, including unaffordable housing and rising inequality. He warns that the worst economic impacts might still be ahead. Chancellor discusses the role of interest rates in fostering 'zombie companies' and the widening wealth gap. He also critiques the exploitative nature of payday loans amid these trends and offers insights into navigating current market dynamics, especially for tech valuations and investment strategies.
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The Importance of Interest Rates
- Interest rates are fundamental to finance, reflecting humanity's mortality and impatience.
- They determine asset valuation, savings, investment decisions, and economic stability.
Japanese Government Bonds and Market Distortion
- Edward Chancellor discusses his experience shorting Japanese government bonds after the 2008 financial crisis.
- Despite anticipating mispricing, these bonds defied expectations, highlighting the distorting effects of near-zero interest rates.
Marshmallow Test and Negative Interest Rates
- The marshmallow test illustrates the concept of time preference, where delayed gratification yields higher returns (interest).
- Negative interest rates discourage saving and encourage consumption, potentially harming long-term economic health.
