Most people don't actually know what this means other than higher rates = bad. To be fair, that's not wrong exactly.
That is because people only look at the supply of money and ignore demand.
Rising interest rates in an expanding economy is a good thing. That means demand is there and investment is active. People seem to think only in terms of a morgage or something like that. They completely overlook the investing side.
A CFO is not going to sign a 1% loan on a factory if the ROI is flat to negative. If there is going to be a 35% return, the same CFP will sing a 10% mortage.
Friedman talked about the interest rate fallacy. The reason the Fed has to monkey with the interest rates is there is not enough money in the economy.
This is not a surprise considering the impact of technology on the overall economy. The amount of money required to sustain growth is enormous and bank lending is basically flat since the GFC.
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Well we are a long ways from rising rates in an expanding economy environment.
Ideally we would have a free market in money and real world market participants would come together to create an interest rate that reflects actual supply of money and actual demand for money.
But that's just not how the broad monetary system works.
It is how defi lending protocols work though. We can see when utilization rates for BNB or whatever get high interest rates skyrocket.
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