Talk:Interest rate/Archive 1

This is an archive of past discussions about Interest rate. Do not edit the contents of this page. If you wish to start a new discussion or revive an old one, please do so on the current talk page.

Archive 1

Needs link to mortgages

This really needs some reference (or disambig link) to mortgages, but I don't know enough about economics and capitalism to write it myself. — OwenBlacker 20:19, 14 June 2004 (UTC)

Incomplete definition

This definition of interest rates is incomplete. A more complete definition might include the actual origins of interest rates from a theoretical standpoint (i.e. for what reason does a "price" for the use of money [which is itself simply the current value of a set number of goods or services] exist?). Adam Smith makes several references to the origins of interest rates in his Wealth of Nations which should be mentioned. — Preceding unsigned comment added by Ljz00 (talk • contribs) 15:53, 17 July 2005 (UTC)

Can someone make a redirect from Interest Rates to this page (note the capital)

please MrDark 09:34, 29 April 2006 (UTC)

Done. cannona 21:46, 9 August 2006 (UTC)

Level of rates

Great theoretical treatment of rates. To most though interest rates mean what they can earn on their savings or pay on their debt especially in these increasingly difficult times. Found existing external links unsatisfactory in this regard. Have therefore added link to daily changing offshore rates page - other links seem to relate only to US. — Preceding unsigned comment added by 88.96.12.182 (talk) 14:24, 4 September 2006 (UTC)

Switch contents with Interest?

What do you people think of a major switch of content between these two links? The only content on compounding is there, not here. And piles of the discussion stuff there are duplicates of stuff here. A lot of the stuff here is not about rates at all. -- Retail Investor 19:02, 9 September 2006 (UTC)

Intended Meaning Inverted

In the section 'Liquidity' there is a statement A 10-year loan, for instance, is very liquid compared to a 1-year loan. but I think this should be the opposite way around - surely the 1 year loan is more liquid. Of course it depends whether you're the lender or borrower. In the context of the article at this point it seems to be a discussion about the motivation for interest rates being determined by the views of the lender, so I'd take it to be the lender whose point of view is being taken. I don't feel confident enough to make the edit since I'm not an expert in this area. —Preceding unsigned comment added by Cefn (talk • contribs) 20:22, 19 December 2008 (UTC)

Clarity

This article does not adequately explain how interest rates affect investment, money supply and unemployment. Can someone please improve the article on this front? 121.241.113.194 (talk) 10:47, 12 February 2009 (UTC)

Nominal Vs. Real; Finance vs. Economics

Unless I am much mistaken, in financial math, real and nominal interest rates refer to something completely different than the nom/real rates discussed in this article. Any ideas on how this can be differentiated? - cannona 21:39, 9 August 2006 (UTC)

I'm wondering why the formula used for converting nominal interest rates to real rates is not simplified to r=(i-m)/(1+m), with i being the nominal interest rate, r being the real interst rate, and m being the expected inflation rate. The current formula is more confusing. Thoughts? --Johnsassar (talk) 13:19, 10 July 2010 (UTC)

Issues with the Introduction

The introduction had the following in it, which I have since removed:

This happened in Japan in the late 1980s and early 1990s, resulting in large unpaid debts to the Japanese banks and the bankruptcy of these banks and causing stagflation in the Japanese economy (Japan being the world's second largest economy at the time), with exports becoming the last pillar for the growth of the Japanese economy throughout the rest of the 1990s and early 2000s. The same scenario resulted from the United States' lowering of interest rate since the late 1990s to the present (see 2007–2012 global financial crisis), substantially by the decision of the Federal Reserve System. Under Margaret Thatcher, the United Kingdom's economy maintained stable growth by not allowing the Bank of England to reduce interest rates.

This didn't seem to belong in the introduction, for a couple of reasons. First, it is far too specific and detailed for the intro section, and belongs in the body of the article if it belongs anywhere, which leads to my second point; these claims are controversial. The causes of the events referenced in the Japanese, US, and British economies are still a topic of debate, are nuanced, are complex, and therefore broad claims about them do not belong in the intro of an encylopedia article on interest rates. Anyone who is looking for an introduction - a basic understanding, without reading the whole article, of what the term "interest rate" means - is served poorly (and is likely to be confused by) having stuff like this in the introduction.

It also wasn't properly cited, but that's not the central reason why it didn't belong in the intro.

Let me know what you think. Spiral5800 (talk) 20:19, 22 September 2014 (UTC)

Negative interest rates

If a central bank's deposit rate is below 0, then banks would exchange their reserves at the central bank for cash if storing the cash is cheaper than "receiving" the interest. So how does the Sveriges Riksbank dictate how much cash a bank may hold? And why can't it be circumvented e. g. by setting up a company which receives loans at a very low rates and then stores the cash? MMMMM742 (talk) 22:13, 5 September 2009 (UTC)

I think the article is wrong, it says "This negative interest rate is possible because Swedish banks, as regulated companies, must hold these reserves with the central bank – they do not have the option of holding cash.". This is not it. Riksbank WANT TO DISCOURAGE commercial banks to park money with them over night, and instead make them lend it to other commercial banks, something they didn't want to do because of bank failure risk (STIBOR had a gigantic spread). So they wanted to put a penalty for this, to make credit flow again and not all of it ending up at the Riksbank. Kricke (talk) 13:48, 18 December 2009 (UTC)

Is this information about the negative interest rate even accurate? The information on this article suggests it was a policy that wasn't implemented, and I can't find any sources which corroborate. Fips (talk) 13:57, 26 February 2013 (UTC)

If savers have to pay interest on money in the bank, they would just buy gold and bitcoins. This is what happening in Cyprus when a tax on savings was proposed. QuentinUK (talk) 10:54, 25 January 2015 (UTC)

Fiscal Policy more appropriate for asset bubbles

Asset bubbles can be controlled through the composition of spending and tax e.g. use of Georgist land tax policies to discourage real estate bubbles. This is not generally what monetary policy is for. 94.1.217.22 (talk) 15:27, 8 July 2015 (UTC)

Rewrite

I've just done what I think is a decent rewrite of this, which previously had big holes ... please add more stuff, you know you want to! The Land 19:57, 18 November 2005 (UTC)

I have started my own re-write. I hope no-one is offended. --Jonathan G. G. Lewis — Preceding unsigned comment added by Jonazo (talk • contribs) 01:30, 25 March 2016 (UTC)

Clean up

Is anyone going to clean up this article. I'm going to start when I can find time between my MBA at Harvard. —Preceding unsigned comment added by 24.62.114.248 (talk) 23:50, 4 November 2009 (UTC)

I dunno how this talk thing works, but this article is seriously biased towards the theory that the Great Recession was caused by low interest rates (which is a seriously contentious claim to make - even if it is right it shouldn't be here). Some organization is manipulating this information for some end. — Preceding unsigned comment added by 31.49.91.202 (talk) 13:23, 8 April 2014 (UTC)

I have started a rewrite of the article. I hope no-one will be offended. --Jonathan G. G. Lewis — Preceding unsigned comment added by Jonazo (talk • contribs) 01:30, 25 March 2016 (UTC)

Looking good so far. IMHO the lede should also explain what the *purpose* is. Something like Investopedia's "Interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets" or, from (http://dictionary.cambridge.org/), "the interest percent that a bank or other financial company charges you when you borrow money, or the interest percent it pays you when you keep money in an account". Rolf H Nelson (talk) 05:36, 25 March 2016 (UTC)

Thanks for the suggestions. I hesitate to restrict the purpose of borrowing or saving though, when defining interest rate, because the purpose could be just about anything, couldn't it? It doesn't have to be for the use of assets. I think the roles played by borrower and lender are key though. The Cambridge Dictionary definition looks good though. I think I will make a reference to it. Thanks again.

I am a bit bothered that there is so much duplication between this article and the one for interest. If I get around to it, I may see how to streamline or merge them. --Jonathan G. G. Lewis — Preceding unsigned comment added by Jonazo (talk • contribs) 12:21, 2 April 2016 (UTC)

Can the cost of interest rate go up exponentially?

For people who were in debt, is it possible for the bill to rise up at an increasing rate, rather than a constant rate? — Preceding unsigned comment added by Joeleoj123 (talk • contribs) 15:29, 3 August 2016 (UTC)

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The classical theory...

I have added a section setting out the classical theory of the interest rate. It seems to me something that belongs on Wikipedia and I can’t see it anywhere else. But I’m conscious that it looks out of place on this page, which otherwise is finance rather than economics. Colin.champion (talk) 16:49, 18 November 2017 (UTC)

Sounds reasonable to me to have this here; we can always break it out later if the article gets too long. Rolf H Nelson (talk) 20:03, 24 November 2017 (UTC)

Sorry @Rolf h nelson:, I moved my addition across to the article ‘interest’ before I saw your comment, expanding it with reference to other theories. There was an outline sketch of economic theory there already – a few lines on Turgot and Martín de Azpilcueta – so I thought perhaps it was a better place. Colin.champion (talk) 09:50, 25 November 2017 (UTC)

Colin.champion thanks for wanting to improve WP but the content you have added is way too technical (please see WP:TECHNICAL, and you appear to be writing what you know, instead of summarizing what reliable sources say. Please do see your talk page. Jytdog (talk) 21:30, 4 December 2017 (UTC)

@Jytdog: Sorry, I’ve just seen this. I didn’t feel I’d been writing at too technical a level; plenty of Wikipedia is more technical. I consulted a number of sources to extend my knowledge before writing, but certainly there are things I know and care about and things I don’t. Given that I am not (for instance) going to read Böhm-Bawerk to fill in the gaps what do you suggest I do? I’m not particularly committed to what I’ve written, and I’m happy to revert as far as other people feel suitable.Colin.champion (talk) 09:42, 5 December 2017 (UTC)

@Jytdog: incidentally I’m quite happy with the reversions you’ve made with one exception: you’ve taken away the hatnote which explains its relationship with the page on ‘Interest’. Without it someone who arrives at ‘Interest rate’ (perhaps because he or she expects ‘interest’ to be an emotion) won’t know to look at the other page for aspects which more naturally sit there rather than here. Colin.champion (talk) 09:57, 5 December 2017 (UTC)

Sorry.. please feel free to restore, and thank you for being gracious Jytdog (talk) 14:00, 5 December 2017 (UTC)

@Jytdog: I have indeed reverted, though this is in a realisation that the error was mine. There’d been some discussion of the distinction between the two articles in the talk page for 'Interest’ and I realised afterwards that I should have mentioned this discussion here before putting it into effect. So I was thinking of reverting the other page to its state before the changes, but as it is I've reinstated the changes here. At least this makes it easy for people to take a look and say whether they’re happy with the distinction as I’ve made it. I don’t mind following any consensus. @Dianaa: I will put proper dashes and quotation marks in ‘Interest’ in a few days. Colin.champion (talk) 15:46, 5 December 2017 (UTC)

I meant restore the hat. The big bolus of unsourced highly TECHNICAL content is not OK in Wikipedia as I described on your talk page. Jytdog (talk) 15:58, 5 December 2017 (UTC)

@Jytdog: very well. I’ve reverted the corresponding changes to ‘Interest’ since it doesn’t make sense to revert one page and not the other. Colin.champion (talk) 17:05, 5 December 2017 (UTC)

Discussion of interest.

In classical economics interest was the return to capital. Ricardo stated that the word "capital" could be used to refer to money as well as to 'real' capital (tools, machinery, roads, bridges, factories, etc.) but he also said that the writer should make certain not to 'mix' the two uses.

In the world of fiat money and neoconomics "interest" has become the amount of money paid to a lender of money leaving the return to 'real' capital flapping in the brease. Perhaps the term 'dividends' is to be used as the return to real capital but that word includes rent and graft and whatever as it is "a share or profits" and "profit" is an accounting term and NOT an economic term.

In the text about "the causes of interest" your first statement is dependent on the Austrian (microeconomic) concept of time preference . This theory, as currently employed, is total bunk. (See disscussion section of time preference).

In political economy or macroeconomics banks pay a fee to savings and call it "interest" and that is to adjust for actual inflation. As banks do not lend the money of depositors this payment to a saver is also a misnomer. The amounts paid to a lender to reward him for risk would be called "interest" in the classical sense only if the loan is not backed by real capital (e.g. the car does not actually belong to you until it is paid for. until then in belongs to the bank -- repossessed?). So the amount paid to a bank is best described as a finance charge which includes the accounting costs, costs of repossession and resale, and other clarical fees.

Money (especially fiat money) is not capital. All payments for the use of money over and above a finance charge are simply economic rent. Banks create money from thin air every day. We need not borrow yours:) http://GreaterVoice.org/econ/credit.php --208.54.14.25 14:42, 30 November 2005 (UTC)

My edits were describing interest as currently understood by economists, however the point of view you describe is also worth inclusion. The Land 14:56, 30 November 2005 (UTC)

The talk pages are not intended for discussion of the content, but that intended purpose seems widely ignored.

Is there a conclusion to the comments above in this section, in the context of the article? Is there anything in these comments which should bear on improvements to the article, to help the common Wikipedia reader understand the basics? If there is, I think I missed it. --Jonathan G. G. Lewis — Preceding unsigned comment added by Jonazo (talk • contribs) 09:35, 8 July 2019 (UTC)

Dr. Gavin's comment on this article

Dr. Gavin has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

This page tries to do too much. I would never recommend it as an introduction to the concept of interest rates.

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Gavin has published scholarly research which seems to be relevant to this Wikipedia article:

Reference : William T. Gavin & Benjamin D. Keen, 2012. "The zero lower bound and the dual mandate," Working Papers 2012-026, Federal Reserve Bank of St. Louis.

ExpertIdeasBot (talk) 14:44, 30 May 2016 (UTC)

I am not sure what constructive action this expert intends editors to take here. Does anyone want to take a guess? --Jonathan G. G. Lewis — Preceding unsigned comment added by Jonazo (talk • contribs) 09:53, 8 July 2019 (UTC)