Why the Cost of Money Is About to Go Up
It’s been headed down for decades, but the most important price in the global economy is changing direction. Bloomberg Originals explains why.
Photographer: Bloomberg
What’s the most important price in the global economy? The price of oil? The price of semiconductors? The price of a Big Mac? More important than any of these is the price of money. For more than three decades it was falling, but now it’s set to rise. In the mini-documentary The Rising Cost of Money, Bloomberg Originals explains why this is happening—and what it means for you.
Ask most people how the price of money is set, and they’ll say via interest rates determined by central banks like the US Federal Reserve. In fact, there’s a deeper logic at work. Fundamentally, the price of money (like the price of anything else) reflects the balance of supply and demand. A higher supply of savings pushes rates down. More investment demand pushes them up.