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S

Snowy

Member
Why does increasing the supply of capital lead to lower market costs for capital which leads to lower real interest rates?
 
Basic economics - supply and demand.

More capital is more people wanting to invest, so borrowers can get away with offering/paying less to borrow. Investors may be desperate to invest for something rather than nothing and offer to lend for less.

Generally most people need to earn at least inflation so it's the real part of the return being affected.
 
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