Ultimately I have to return to #Keynes c1933. where he related #liquiditypreference to a three dimensional relationship between the state of the news (#expectations), the #rateofinterest, and the quantity of #money. Fixing any one of these left the adjustment between the other two. In particular this thinking allowed the rate of interest to be determined exogenously. Perhaps the failure to grasp this is one factor behind the subsequent success of #ISLM
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But we still talk about the #rateofinterest as though it is some sort of price. We are just not sure what of. We are pretty sure though it has an effect. Yet in many respects it can seen be a minor factor (internally financed corporate investment, credit card spending etc).

So, is the #rateofinterest the return for lending, the return for waiting, the return on investment, the return on?? It’s not obvious, but it should be clear is that there is not a single market here. So many different things cannot be brought into any sort of #equilibrium by “the” rate of interest or even a structure that’s so diverse.

If #Neoclassical theory is to be believed, the #rateofinterest affects #savings. Yet savings rates are widely dispersed, and are slow to adjust. There are no clear signs of competitive rates from the dominant high street #banks. Inertia not the market rules. For some (the more wealthy) low rates of interest will make risky investments more attractive, but it’s hardly an #efficientmarket which thereby promotes speculation.

Whilst it’s likely that my mortgage and overdraft rates will vary with the #BankRate, far less so my credit card or HP finance rate. There isn’t an argument about relative #risk here, because the credit agencies have most of the relevant information; my #rateofinterest does not vary: my credit limit does.

There is a #centralbank rate set by dictat not by any market forces, an instrument of policy, to which other systems adapt - pretty much #Keynes position from the mid 1930s (if not before).
There is a #rateofinterest I may be charged by various financial institutions but that varies hugely, and woe-betide the rates from payday lenders.