Posted by: Dirk | January 10, 2009

The Economist explains the money markets

I have recently taught my students that instead of one interest rate there are many. Some of them are confusing. In December 2008, the SEB in Germany way offering a credit of up to €2,500 to solvent borrowers – at zero interest (and without default insurance). The same bank would have paid an interest rate of up to 5% on money that you put in one of their savings accounts. Money for nothing. Another issues is the interest rate at which banks lend each other money (the LIBOR) and the interest rate at which non-financial firms can borrow. I found a nice video at The Economist (click here to go their website).

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