Time preferences determining the interest rate

[John_James]

You’re missing a few things.

@Ovah

Its of course logical that if people began valuing future consumption more than prev. (and present consumption less) then they would save more (consume less), which would make interest rates go up.

Other way around. Think about it. If people save more, that means there’s more money available to be lent out…that is, the supply has increased…thus meaning the price (i.e. interest rate) would go down.

So that would mean that all savings in the country would increase the suply of money.

How did you get to that?

However I dont fully understand what “counts” as savings. Assuming that we have a 100% reserve requirement for banks, does it count as savings if people pay banks to store their gold? Since those money can’t be relend this doesn’t add to the suply of money (?), and hence doesn’t affect interest rates.

If you pay a bank a fee for storing something, it’s just that…a fee. That’s not your money anymore. That’s their money. They earned it. Would you consider it “saving” $100 every month because that’s what you pay Public Storage every 30 days for providing you a unit to keep your boat in?

That would mean that the the real savings = the amount people directly invest in bonds/equities (?).

Here’s a couple of articles that address “saving” that might help:

Saving Versus Hoarding

The Form of Saving Matters

Also, for more info on interest rates, check out this recent thread. There’s plenty in there that will probably help.

P.S.

Welcome to the forum! Be sure to beginner’s thread.