Thread: Money

Which is more importent?
The availability or the cost of money?

One goes hand in hand with the other IMO.

Availability of money means "market demand" and I presume you mean cost as "what you must do to service that market" and achieve a financial return.

Otherwise I have no idea what your on about mate.

Originally Posted by good2bhappy

Which is more importent?
The availability or the cost of money?

Interesting and circuitous question.

Have you been pondering this for a long time?

Have you been pondering this for a long time?

Seconded.

Originally Posted by jim1176

Have you been pondering this for a long time?

along with, the mystery of where the lint in my belly button comes from?

^ from the looks of that belly Ned you have quite a mystery there

Originally Posted by good2bhappy

Which is more importent? The availability or the cost of money?

They are hand in hand.

The availability of money is predicated on the 'Real' (after inflation) cost of money. If money is made 'expensive', there is less availability because less people will borrow it. If money is made cheap, the opposite will apply. This is called monetary policy.

To run a decent monetary policy in the medium to long term, the cost of money has to safely exceed both the inflation rate, and the risk free rate- say the Interest paid by a 10 year US Treasury Bond. Central Banks and Treasuries tweak monetary policy to reflect differing economic conditions- for example, to prevent or alleviate an economic slowdown, money can be temporarily made 'cheaper', ie more available.

It is a dangerous policy for anything but the short term however, as has been exposed to calamitous effect. If money is kept too cheap for too long, it encourages a speculative and asset price inflation bubble (both fuelled by excessive borrowing)- this will ultimately burst, sending shockwaves throughout the financial system. This is what you are seeing now.