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I know the kind of interest rate I want to charge to provide debt as an oldfashioned (toxic) banker; I have no idea what the concept is replaced by in Chris's version.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Jan 19th, 2008 at 09:40:51 AM EST
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Well it's actually about the "market return" on Capital isn't it, if one considers Capital to be property in productive assets?

Money, unless it is Money as Debt, actually has no "cost".

The cost of Credit is the shared cost of administration, and the shared costs of defaults.

This has nothing whatever to do with arbitrary rates of interest.

Likewise the cost of Capital has nothing to do with interest rates unless you are in an economy where Money is debt.

The cost of Capital relates to the "market price" and that has declined from 25% pa in Babylonian times, through 10% pa in medieval times to around 5% pa at the Indutsrial Revolution. Now the world is awash in productive capital, and the streams of use value they generate, I reckon the market price can be little over 1%.

All of these in real terms, of course, since without deficit-based money there was little inflation historically, and there would have been little inflation in the last 100 years, I suspect.

The sort of rate Wessex Water got on their 50 year index-linked borrowing ie 1.49% pa is indicative, I suspect.

What you are able to "charge" for credit you create is pretty much constrained, I think.

There's a lot of stupidly high expectations out there for sure.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 19th, 2008 at 02:13:37 PM EST
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ChrisCook:
There's a lot of stupidly high expectations out there for sure.
The whole "wealth management" industry exists to cater to people with more money than they know what to do with, and stupidly high expectations.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Jan 26th, 2008 at 11:54:34 AM EST
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