Rate Disparity Book

Rate Disparity

Why Interest Rates Differ

This website is dedicated to my central thesis about interest rates, that interest rates vary for many rational reasons that are not effectively described as "risk".

Much like difference in wage rates and profit rates, interest rates vary depending on a number of factors:

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The Old Way: Risk Adjusted Present Value

The old way of thinking about interest rates is centered around doing present value calculations of "cash flows". "Cash" is just a shorthand for things priced in cash that are immediately liquid.

The issue with this is that it requires predicting the future across arbitrary and uncertain time horizons, using historical observations where it is difficult to disentangle a robust trend from selection and/or survivorship bias.

TODO <a>Rate Risk and Gambling</a>

The New Way: Adaptive Value Growth

Adaptive value growth is the idea that things can grow at different rates, and that is generally okay, although things that grow much faster or slower than average, tend to be symptoms of poorly managed resources or reckless disruption.

Adaptive vs. Competitive Equilibrium