Reply To: Some questions


I think I am missing something that just isn’t clicking.

Let’s assume this. If I have 100 ounces of gold, and my time preference ratio is 10%, and I have no demand to gold money, my allocation would be 90 consumption 10 saving- investment. If I were to demand more money, say 10 ounces, my allocation would then be 10 ounces to gold, 81 consumption, and 9 investment. What I dont understand is that how can the interest rate stay the same (10%) when the demand of overall present goods went up. So now, there is only demand of 9 ounces for future goods, and 91 ounces for present goods. So I think the problem I am having is seeing the difference between if someone were to a) consume 91 and save 9, and b) someone holding 10 ounces, consuming 81, and saving 9. Between these two scenarios, to me it doesn’t make any sense how the interest rate between a and b can be the same. Am I completely over thinking this?