Categories: General Market Commentary / Precious Metals
Topics: General Market Commentary / General Precious Metals

Inflation – Deflation – Interest Rates

Inflation – Deflation – Interest Rates

QUESTION:
Is there a correlation between the GDP rate and interest rate ?
Best regards,

BL
ANSWER: No. What central bankers fail to take into consideration is that the interest rate is the OPPORTUNITY COST of money as reflected into the future. This is why interest rates naturally decline during a recession because of the future expectation of what money will buy when it returns. If inflation is say 10%, then lenders demand at least that much back plus a profit. Interest rates reflect the inflation rate (opportunity cost of money) plus a profit.

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