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| | It is very common to have a dental emergency -- a fractured tooth, an abscess, or severe pain when chewing. Over-the-counter pain medication is just masking the problem. Seeing an emergency dentist is critical to getting the source of the problem diagnosed and corrected as soon as possible.<br><br>Here are some common dental emergencies:<br>Toothache: The most common dental emergency. This generally means a badly decayed tooth. As the pain affects the tooth's nerve, treatment involves gently removing any debris lodged in the cavity being careful not to poke deep as this will cause severe pain if the nerve is touched. Next rinse vigorously with warm water. Then soak a small piece of cotton in oil of cloves and insert it in the cavity. This will give temporary relief until a dentist can be reached.<br><br>At times the pain may have a more obscure location such as decay under an old filling. As this can be only corrected by a dentist there are two things you can do to help the pain. Administer a pain pill (aspirin or some other analgesic) internally or dissolve a tablet in a half glass (4 oz) of warm water holding it in the mouth for several minutes before spitting it out. DO NOT PLACE A WHOLE TABLET OR ANY PART OF IT IN THE TOOTH OR AGAINST THE SOFT GUM TISSUE AS IT WILL RESULT IN A NASTY BURN.<br><br>Swollen Jaw: This may be caused by several conditions the most probable being an abscessed tooth. In any case the treatment should be to reduce pain and swelling. An ice pack held on the outside of the jaw, (ten minutes on and ten minutes off) will take care of both. If this does not control the pain, an analgesic tablet can be given every four hours.<br><br>Other Oral Injuries: Broken teeth, cut lips, bitten tongue or lips if severe means a trip to a dentist as soon as possible. In the mean time rinse the mouth with warm water and place cold compression the face opposite the injury. If there is a lot of bleeding, apply direct pressure to the bleeding area. If bleeding does not stop get patient to the emergency room of a hospital as stitches may be necessary.<br><br>Prolonged Bleeding Following Extraction: Place a gauze pad or better still a moistened tea bag over the socket and have the patient bite down gently on it for 30 to 45 minutes. The tannic acid in the tea seeps into the tissues and often helps stop the bleeding. If bleeding continues after two hours, call the dentist or take patient to the emergency room of the nearest hospital.<br><br>Broken Jaw: If you suspect the patient's jaw is broken, bring the upper and lower teeth together. Put a necktie, handkerchief or towel under the chin, tying it over the head to immobilize the jaw until you can get the patient to a dentist or the emergency room of a hospital.<br><br>Painful Erupting Tooth: In young children teething pain can come from a loose baby tooth or from an erupting permanent tooth. Some relief can be given by crushing a little ice and wrapping it in gauze or a clean piece of cloth and putting it directly on the tooth or gum tissue where it hurts. The numbing effect of the cold, along with an appropriate dose of aspirin, usually provides temporary relief.<br><br>In young adults, an erupting 3rd molar (Wisdom tooth), especially if it is impacted, can cause the jaw to swell and be quite painful. Often the gum around the tooth will show signs of infection. Temporary relief can be had by giving aspirin or some other painkiller and by dissolving an aspirin in half a glass of warm water and holding this solution in the mouth over the sore gum. AGAIN DO NOT PLACE A TABLET DIRECTLY OVER THE GUM OR CHEEK OR USE THE ASPIRIN SOLUTION ANY STRONGER THAN RECOMMENDED TO PREVENT BURNING THE TISSUE. The swelling of the jaw can be reduced by using an ice pack on the outside of the face at intervals of ten minutes on and ten minutes off.<br><br>If you liked this article and you would certainly like to obtain more facts regarding [http://www.youtube.com/watch?v=90z1mmiwNS8 dentist DC] kindly check out our own site. |
| {{Finance sidebar}}
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| An '''interest rate''' is the rate at which [[interest]] is paid by a borrower (debtor) for the use of money that they borrow from a [[lender]] (creditor). Specifically, the interest rate (I/m) is a percent of principal (P) paid a certain amount of times (m) per period (usually quoted per annum). For example, a small company borrows capital from a bank to buy new assets for its business, and in return the lender receives interest at a predetermined interest rate for deferring the use of funds and instead lending it to the borrower. Interest rates are normally expressed as a [[percentage]] of the [[principal sum|principal]] for a period of one year.<ref>[http://www.investorwords.com/2539/interest_rate.html Definition of interest rate from Investorwords.com]</ref>
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| Interest-rate targets are a vital tool of [[monetary policy]] and are taken into account when dealing with variables like [[investment]], [[inflation]], and [[unemployment]]. The [[central bank]]s of countries generally tend to reduce interest rates when they wish to increase investment and consumption in the country's economy. However, a low interest rate as a macro-economic policy can be [[risk management|risky]] and may lead to the creation of an [[Japanese asset price bubble|economic bubble]], in which large amounts of investments are poured into the real-estate market and stock market. This happened in Japan in the late 1980s and early 1990s, resulting in the large unpaid debts to the Japanese banks and the bankruptcy of these banks and causing [[stagflation]] in the [[Economy of Japan|Japanese economy]] (Japan being the world's second largest economy at the time), with exports becoming the last pillar for the growth of the Japanese economy throughout the rest of 1990s and early 2000s. The same scenario resulted from the United States' lowering of interest rate since late 1990s to the present (see [[2007–2012 global financial crisis]]) substantially by the decision of the [[Federal Reserve System]]. Under [[Margaret Thatcher]], the United Kingdom's economy maintained stable growth by not allowing the [[Bank of England]] to reduce interest rates. In [[developed economies]], interest-rate adjustments are thus made to keep inflation within a target range for the health of [[economic activities]] or cap the interest rate concurrently with [[economic growth]] to safeguard economic [[momentum]].<ref>{{cite news |url= http://www.reuters.com/article/2011/08/02/usa-debt-inflation-idUSN1E7711UC20110802 |work=Reuters |title=INSIGHT-Mild inflation, low interest rates could help economy |date=2 August 2011}}</ref><ref>{{cite journal |last=Sepehri |first=Ardeshir |last2=Moshiri |first2=Saeed |year=2004 |title=Inflation‐Growth Profiles Across Countries: Evidence from Developing and Developed Countries |journal=International Review of Applied Economics |volume=18 |issue=2 |pages=191–207 |doi=10.1080/0269217042000186679 }}</ref><ref>http://www.imf.org/external/pubs/ft/fandd/2003/06/pdf/inflatio.pdf</ref><ref>http://www.imf.org/external/pubs/ft/fandd/2003/06/index.htm</ref><ref>http://www.imf.org/external/pubs/ft/fandd/2010/03/basics.htm</ref>
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| ==Interest rate notations==
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| What is commonly referred to as the ''interest rate'' in the media is generally the rate offered on overnight deposits by the Central Bank or other authority, [[effective interest rate|annualized]].{{citation needed|date=August 2013}}
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| The total interest on a loan or investment depends on the timescale the interest is calculated on, because interest paid may be [[compound interest|compounded]].
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| In [[retail finance]], the [[annual percentage rate]] and [[effective annual rate]] concepts have been introduced to help consumers easily compare different products with different payment structures.
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| In business and investment finance, the effective interest rate is often derived from the [[yield (finance)|yield]], a composite measure which takes into account all payments of interest and capital from the investment. The notion of [[annual effective discount rate]], often called simply the ''discount rate'', is also used in finance, as an alternative measure to the effective annual rate which is more useful or standard in some contexts. A positive annual effective discount rate is always a lower number than the interest rate it represents.
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| ==Historical interest rates==
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| [[Image:German bank interest rates from 1967 to 2003 grid.svg|thumb|right|Germany experienced deposit interest rates from 14% in 1969 down to almost 2% in 2003]]
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| In the past two centuries, interest rates have been variously set either by national governments or central banks. For example, the Federal Reserve [[federal funds rate]] in the United States has varied between about 0.25% to 19% from 1954 to 2008, while the [[Bank of England]] base rate varied between 0.5% and 15% from 1989 to 2009,<ref>moneyextra.com [http://www.moneyextra.com/dictionary/interest-rate-history-003455.php Interest Rate History]. Retrieved 2008-10-27</ref><ref>{{cite news |url= http://news.bbc.co.uk/1/hi/business/7925620.stm |title=UK interest rates lowered to 0.5% |work=BBC News |date=5 March 2009}}</ref> and Germany experienced rates close to 90% in the 1920s down to about 2% in the 2000s.<ref>{{Harv|Homer|Sylla|Sylla|1996|loc=p. 509}}</ref><ref>[[Bundesbank]]. [http://www.bundesbank.de/statistik/statistik_zeitreihen.en.php?lang=en&open=&func=row&tr=SU0021 BBK – Statistics – Time series database]. Retrieved 2008-10-27</ref> During an attempt to tackle spiraling hyperinflation in 2007, the Central Bank of Zimbabwe increased interest rates for borrowing to 800%.<ref>worldeconomies.co.uk [http://www.worldeconomies.co.uk/03102007-382.html Zimbabwe currency revised to help inflation]</ref>
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| {{Expand section|date=October 2008}}<!-- please expand this to a summary of rates of major nations over the last hundred years, longer if possible. Maybe a table with years or decades as rows? -->
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| The [[prime rate|interest rates on prime credits]] in the late 1970s and early 1980s were far higher than had been recorded – higher than previous US peaks since 1800, than British peaks since 1700, or than Dutch peaks since 1600; "since modern capital markets came into existence, there have never been such high long-term rates" as in this period.<ref>{{Harv|Homer|Sylla|Sylla|1996|loc=p. 1}}</ref>
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| Possibly before modern capital markets, there have been some accounts that savings deposits could achieve an annual return of at least 25% and up to as high as 50%. (William Ellis and Richard Dawes, "Lessons on the Phenomenon of Industrial Life... ", 1857, p III–IV)
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| ===Interest rates in the United States===
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| In the United States, authority for interest rate decisions is divided between the Board of Governors of the Federal Reserve (Board) and the [[Federal Open Market Committee]] (FOMC). The Board decides on changes in [[Annual effective discount rate|discount rates]] after recommendations submitted by one or more of the regional Federal Reserve Banks. The FOMC decides on open market operations, including the desired levels of [[monetary base|central bank money]] or the desired federal funds market rate.
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| Currently, interest rates in the United States are at or near historical lows.
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| ==Reasons for interest rate changes==
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| * '''Political short-term gain''': Lowering interest rates can give the economy a short-run boost. Under normal conditions, most economists think a cut in interest rates will only give a short term gain in economic activity that will soon be offset by inflation. The quick boost can influence elections. Most economists advocate independent central banks to limit the influence of politics on interest rates.
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| * '''Deferred consumption''': When money is loaned the lender delays spending the money on [[Consumption (economics)|consumption]] goods. Since according to [[time preference]] theory people prefer goods now to goods later, in a free market there will be a positive interest rate.
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| * '''Inflationary expectations''': Most economies generally exhibit [[inflation]], meaning a given amount of money buys fewer goods in the future than it will now. The borrower needs to compensate the lender for this.
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| * '''Alternative investments''': The lender has a choice between using his money in different investments. If he chooses one, he forgoes the returns from all the others. Different investments effectively compete for funds.
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| * '''Risks of investment''': There is always a risk that the borrower will go [[Bankruptcy|bankrupt]], abscond, die, or otherwise [[Default (finance)|default]] on the loan. This means that a lender generally charges a [[risk premium]] to ensure that, across his investments, he is compensated for those that fail.
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| * '''Liquidity preference''': People prefer to have their resources available in a form that can immediately be exchanged, rather than a form that takes time to realize.
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| * '''Taxes''': Because some of the gains from interest may be subject to taxes, the lender may insist on a higher rate to make up for this loss.
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| ==Real vs nominal interest rates==
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| {{Further|Fisher equation}}
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| The [[nominal interest rate]] is the amount, in percentage terms, of interest payable.
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| For example, suppose a household deposits $100 with a bank for 1 year and they receive interest of $10. At the end of the year their balance is $110. In this case, the [[nominal interest rate]] is 10% per annum.
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| The [[real interest rate]], which measures the [[purchasing power]] of interest receipts, is calculated by adjusting the nominal rate charged to take [[inflation]] into account. (See [[real vs. nominal in economics]].)
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| If inflation in the economy has been 10% in the year, then the $110 in the account at the end of the year buys the same amount as the $100 did a year ago. The [[real interest rate]], in this case, is zero.
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| After the fact, the 'realized' real interest rate, which has actually occurred, is given by the [[Fisher equation]], and is
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| : <math>r = \frac{1+i}{1+p}-1\,\!</math>
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| where '''p''' = the actual inflation rate over the year.
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| The [[linear approximation]]
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| : <math>r \approx i-p\,\!</math>
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| is widely used.
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| The expected real returns on an investment, before it is made, are:
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| : <math>i_r = i_n - p_e\,\!</math>
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| where:
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| : <math>i_r\,\!</math> = real interest rate | |
| : <math>i_n\,\!</math> = nominal interest rate
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| : <math>p_e\,\!</math> = expected or projected inflation over the year
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| ==Market interest rates==
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| There is a [[market]] for investments which ultimately includes the [[money market]], [[bond market]], [[stock market]], and [[currency market]] as well as retail financial institutions like [[bank]]s.
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| Exactly how these markets function are sometimes complicated. However, economists generally agree that the interest rates yielded by any investment take into account:
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| * The risk-free cost of capital
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| * Inflationary expectations
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| * The level of risk in the investment
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| * The costs of the transaction
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| This rate incorporates the ''deferred consumption'' and ''alternative investments'' elements of interest.
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| ===Inflationary expectations===
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| According to the theory of [[rational expectations]], people form an expectation of what will happen to [[inflation]] in the future. They then ensure that they offer or ask a ''nominal interest rate'' that means they have the appropriate [[real interest rate]] on their investment.
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| This is given by the formula:
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| : <math>i_n = i_r + p_e\,\!</math>
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| where:
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| : <math>i_n\,\!</math> = offered nominal interest rate
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| : <math>i_r\,\!</math> = desired real interest rate
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| : <math>p_e\,\!</math> = inflationary expectations
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| ===Risk===
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| The level of [[risk]] in investments is taken into consideration. This is why very [[volatility (finance)|volatile]] investments like [[share (finance)|shares]] and [[junk bond]]s have higher returns than safer ones like [[government bond]]s.
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| The extra-interest charged on a risky investment is the [[risk premium]]. The required risk premium is dependent on the [[risk preferences]] of the lender.
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| If an investment is 50% likely to go bankrupt, a [[risk neutral|risk-neutral]] lender will require their returns to double. So for an investment normally returning $100 they would require $200 back. A [[Risk aversion|risk-averse]] lender would require more than $200 back and a [[risk-loving]] lender less than $200. Evidence suggests that most lenders are in fact risk-averse. | |
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| Generally speaking, a longer-term investment carries a '''maturity risk premium''', because long-term loans are exposed to more risk of default during their duration.
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| ===Liquidity preference===
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| Most investors prefer their money to be in [[cash]] than in less [[Fungibility|fungible]] investments. Cash is on hand to be spent immediately if the need arises, but some investments require time or effort to transfer into spendable form. This is known as [[liquidity preference]]. A 1-year loan, for instance, is very liquid compared to a 10-year loan. A 10-year US [[Treasury bond]], however, is liquid because it can easily be sold on the market.
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| ===A market interest-rate model===
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| A basic interest rate pricing model for an asset
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| : <math>i_n = i_r + p_e + rp + lp\,\!</math>
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| Assuming perfect information, '''p<sub>e</sub>''' is the same for all participants in the market, and this is identical to:
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| : <math>i_n = i^*_n + rp + lp\,\!</math>
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| where
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| : '''i<sub>n</sub>''' is the nominal interest rate on a given investment
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| :'''i<sub>r</sub>''' is the risk-free return to capital
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| : '''i*<sub>n</sub>''' = the nominal interest rate on a short-term risk-free liquid bond (such as U.S. Treasury Bills).
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| : '''rp''' = a risk premium reflecting the length of the investment and the likelihood the borrower will default
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| : '''lp''' = liquidity premium (reflecting the perceived difficulty of converting the asset into money and thus into goods).
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| ===Spread===
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| The ''spread'' of interest rates is the lending rate minus the deposit rate.<ref>[http://data.worldbank.org/indicator/FR.INR.LNDP Interest rate spread (lending rate minus deposit rate, %)] from [[World Bank]]. 2012</ref> This spread covers operating costs for banks providing loans and deposits. A ''negative spread'' is where a deposit rate is higher than the lending rate.<ref>[http://definitions.uslegal.com/n/negative-spread/ Negative Spread Law & Legal Definition], retrieved January 2013</ref>
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| ==Interest rates in macroeconomics==
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| ===Elasticity of substitution===
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| The elasticity of substitution (full name should be the marginal rate of substitution of the relative allocation) affects the real interest rate. The larger the magnitude of the elasticity of substitution, the more the exchange, and the lower the real interest rate.
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| ===Output and unemployment===
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| Interest rates are the main determinant of [[investment]] on a macroeconomic scale. The current thought is that if interest rates increase across the board, then investment decreases, causing a fall in [[national income]]. However, the [[Austrian School|Austrian School of Economics]] sees higher rates as leading to greater investment in order to earn the interest to pay the depositors. Higher rates encourage more saving and thus more investment and thus more jobs to increase production to increase profits. Higher rates also discourage economically unproductive lending such as consumer credit and mortgage lending. Also consumer credit tends to be used by consumers to buy imported products whereas business loans tend to be domestic and lead to more domestic job creation [and/or capital investment in machinery] in order to increase production to earn more profit.
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| A government institution, usually a [[central bank]], can lend money to financial institutions to influence their interest rates as the main tool of [[monetary policy]]. Usually central bank interest rates are lower than commercial interest rates since banks borrow money from the central bank then lend the money at a higher rate to generate most of their profit.
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| By altering interest rates, the government institution is able to affect the interest rates faced by everyone who wants to borrow money for economic [[investment]]. Investment can change rapidly in response to changes in interest rates and the total output.
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| ===Open Market Operations in the United States===
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| [[Image:Federal funds effective rate 1954 to present.svg|thumb|right|375px|The effective federal funds rate in the US charted over more than half a century]]
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| The Federal Reserve (often referred to as 'The Fed') implements [[monetary policy]] largely by targeting the [[federal funds rate]]. This is the rate that banks charge each other for overnight loans of [[federal funds]], which are the reserves held by banks at the Fed.
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| [[Open market operations]] are one tool within monetary policy implemented by the Federal Reserve to steer short-term interest rates using the power to buy and sell treasury [[securities]].
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| ===Money and inflation===
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| Loans, bonds, and shares have some of the characteristics of money and are included in the [[broad money]] supply.
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| By setting '''i*<sub>n</sub>''', the government institution can affect the markets to alter the total of loans, bonds and shares issued. Generally speaking, a higher real interest rate reduces the broad money supply.
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| Through the [[quantity theory of money]], increases in the money supply lead to inflation.
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| ==Impact on savings and pensions==
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| [[Financial economist]]s such as [[:fr: Forum Mondial des Fonds de Pension|World Pensions Council (WPC)]] researchers have argued that durably low interest rates in most G20 countries will have an adverse impact on the [[funding]] positions of pension funds as “without returns that outstrip inflation, pension investors face the real value of their savings declining rather than ratcheting up over the next few years” <ref name="Reuters">{{Cite news|author=M. Nicolas J. Firzli quoted in Sinead Cruise |title= 'Zero Return World Squeezes Retirement Plans' |url= http://uk.mobile.reuters.com/article/businessNews/idUKBRE8720T320120803 |work=Reuters with CNBC |date= 4 August 2012|accessdate=5 Aug 2012| location=.}}</ref>
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| From 1982 until 2012, most Western economies experienced a period of low inflation combined with relatively high returns on investments across all [[asset class]]es including government bonds. This brought a certain sense of complacency amongst some pension [[actuarial]] consultants and [[regulator (economics)|regulators]], making it seem reasonable to use optimistic economic assumptions to calculate the [[present value]] of future pension liabilities...
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| This potentially long-lasting collapse in returns on [[government bond]]s is taking place against the backdrop of a protracted fall in returns for other core-assets such as blue chip stocks, and, more importantly, a silent demographic shock. Factoring in the corresponding "[[longevity risk]]", pension premiums could be raised significantly while [[disposable income]]s stagnate and employees work longer years before retiring.<ref name="Reuters" />
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| ==Mathematical note==
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| Because interest and inflation are generally given as percentage increases, the formulae above are [[linear approximation|(linear) approximations]].
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| For instance,
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| : <math>i_n = i_r + p_e\,\!</math>
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| is only approximate. In reality, the relationship is
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| : <math>(1 + i_n) = (1 + i_r)(1 + p_e)\,\!</math>
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| so
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| : <math>i_r = \frac {1 + i_n} {1 + p_e} - 1\,\!</math>
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| The two approximations, eliminating [[higher order terms]], are:
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| :<math>\begin{align}
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| (1+x)(1+y) &= 1+x+y+xy &&\approx 1+x+y\\
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| \frac{1}{1+x} &= 1-x+x^2-x^3+\cdots &&\approx 1-x
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| \end{align}</math>
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| The formulae in this article are exact if [[logarithmic unit]]s are used for relative changes, or equivalently if [[logarithm]]s of [[index (economics)|indices]] are used in place of rates, and hold even for large relative changes. Most elegantly, if the [[natural logarithm]] is used, yielding the [[neper]] as logarithmic units, scaling by 100 to obtain the [[centineper]] yields units that are infinitesimally equal to percentage change (hence approximately equal for small values), and for which the linear equations hold for all values.
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| ==Zero interest rate policy==
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| {{Main|Zero interest-rate policy}}
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| A so-called "zero interest rate policy" is a very low—near-zero—central bank target interest rate. At this [[Zero lower bound problem|zero lower bound]] the central bank faces difficulties with conventional monetary policy, because it is generally believed that market interest rates cannot realistically be pushed down into negative territory.
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| ==Negative interest rates==
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| Nominal interest rates are normally positive, but not always. Given the alternative of holding cash, and thus earning 0%, rather than lending it out, profit-seeking lenders will not lend below 0%, as that will guarantee a loss, and a bank offering a negative deposit rate will find few takers, as savers will instead hold cash.<ref>{{cite news |url= http://blogs.ft.com/maverecon/2009/05/negative-interest-rates-when-are-they-coming-to-a-central-bank-near-you/
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| |title=Negative interest rates: when are they coming to a central bank near you?
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| |date=7 May 2009
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| |first=Willem
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| |last=Buiter
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| |author-link=Willem Buiter
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| |work=[[Financial Times]] blog
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| }}</ref>
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| During the [[European sovereign-debt crisis]], government bonds of some countries (Switzerland, Denmark, Germany, Finland, the Netherlands and Austria) have been sold at negative yields. Suggested explanations include desire for safety and protection against the eurozone breaking up (in which case some eurozone countries might redenominate their debt into a stronger currency).<ref>{{cite news |url= http://www.ft.com/intl/cms/s/0/bd22fe1c-d0f1-11e1-8957-00144feabdc0.html#axzz22TvqCmZa
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| |title=Schatz yields turn negative for first time
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| |date=18 July 2012
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| |first=Robin
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| |last=Wigglesworth
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| |work=[[Financial Times]] |location =London
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| }}</ref>
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| More often, ''real'' interest rates can be negative, when nominal interest rates are below inflation. When this is done via government policy (for example, via reserve requirements), this is deemed [[financial repression]], and was practiced by countries such as the [[United States]] and [[United Kingdom]] following World War II (from 1945) until the late 1970s or early 1980s (during and following the [[Post–World War II economic expansion]]).<ref>[http://www.pimco.com/EN/Insights/Pages/The-Caine-Mutiny-Part-2.aspx The Caine Mutiny Part 2], [[Bill Gross]]</ref><ref>[http://www.imf.org/external/pubs/ft/fandd/2011/06/pdf/reinhart.pdf Financial Repression Redux (Reinhart, Kirkegaard, Sbrancia June 2011)]</ref> In the late 1970s, [[United States Treasury security|United States Treasury securities]] with negative real interest rates were deemed {{anchor|certificate of confiscation}}''certificates of confiscation''.<ref>{{Cite news | last = Norris | first = Floyd | title = U.S. Bonds That Could Return Less Than Their Price |work= The New York Times |date=28 October 2010 |url= http://www.nytimes.com/2010/10/29/business/economy/29norris.html}}</ref>
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| Negative interest rates have been proposed in the past, notably in the late 19th century by [[Silvio Gesell]].<ref name="mankiw">{{Cite news |url= http://www.nytimes.com/2009/04/19/business/economy/19view.html |title=It May Be Time for the Fed to Go Negative |work=The New York Times |first=N. Gregory |last=Mankiw |author-link=N. Gregory Mankiw |date=18 April 2009}}</ref> A negative interest rate can be described (as by Gesell) as a "tax on holding money"; he proposed it as the ''[[Freigeld]]'' (free money) component of his ''[[Freiwirtschaft]]'' (free economy) system. To prevent people from holding cash (and thus earning 0%), Gesell suggested issuing money for a limited duration, after which it must be exchanged for new bills; attempts to hold money thus result in it expiring and becoming worthless. Along similar lines, [[John Maynard Keynes]] approvingly cited the idea of a carrying tax on money,<ref name="mankiw" /> (1936, The ''[[General Theory of Employment, Interest and Money]]'') but dismissed it due to administrative difficulties.<ref name="wired">{{Cite news | title = Cash and the 'Carry Tax' | first = Declan | last = McCullagh | work = WIRED | accessdate = 2011-12-21 | url = http://www.wired.com/politics/law/news/1999/10/32121 | date=27 October 1999}}</ref> More recently, a carry tax on currency was proposed by a [[Federal Reserve]] employee (Marvin Goodfriend) in 1999, to be implemented via magnetic strips on bills, deducting the carry tax upon deposit, the tax being based on how long the bill had been held.<ref name="wired" />
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| It has been proposed that a negative interest rate can in principle be levied on existing paper currency via a [[serial number]] lottery: choosing a random number 0 to 9 and declaring that bills whose serial number end in that digit are worthless would yield a negative 10% interest rate, for instance (choosing the last two digits would allow a negative 1% interest rate, and so forth). This was proposed by an anonymous student of [[N. Gregory Mankiw]],<ref name="mankiw" /> though more as a thought experiment than a genuine proposal.<ref>
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| See follow-up blog posts for discussion: "[http://gregmankiw.blogspot.com/2009/04/observations-on-negative-interest-rates.html Observations on Negative Interest Rates]", 19 April 2009;
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| "[http://gregmankiw.blogspot.com/2009/04/more-on-negative-interest-rates.html More on Negative Interest Rates]", 22 April 2009; "[http://gregmankiw.blogspot.com/2009/05/more-on-negative-interest-rates.html More on Negative Interest Rates]", 7 May 2009, all in [http://gregmankiw.blogspot.com/ Greg Mankiw's Blog: Random Observations for Students of Economics]</ref>
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| A much simpler method to achieve negative real interest rates and provide a disincentive to holding cash, is for governments to encourage mildly inflationary monetary policy; indeed, this is what Keynes recommended back in 1936.
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| ===Negative interest on central bank reserves===
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| {{Main|Negative interest on excess reserves}}
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| However, central bank rates can, in fact, be negative. Countries such as Sweden and Denmark have set negative interest on reserves—that is to say, they have charged interest on reserves.<ref>{{cite journal|last=Goodhart|first=C.A.E.|title=The Potential Instruments of Monetary Policy|date=January 2013|series=Financial Markets Group Paper|issue=Special Paper 219|url=http://www2.lse.ac.uk/fmg/workingPapers/specialPapers/PDF/SP219.pdf|accessdate=13 April 2013|at=9-10|publisher=London School of Economics|issn=1359-9151}}</ref><ref>{{cite journal|last=Blinder|first=Alan S.|title=Revisiting Monetary Policy in a Low-Inflation and Low-Utilization Environment|journal=Journal of Money, Credit and Banking|date=February 2012|volume=44|issue=Supplement s1|pages=141–146|doi=10.1111/j.1538-4616.2011.00481.x|url=http://onlinelibrary.wiley.com/doi/10.1111/j.1538-4616.2011.00481.x/abstract|accessdate=13 April 2013}}</ref><ref>{{cite web|last=Thoma|first=Mark|title=Would Lowering the Interest Rate on Excess Reserves Stimulate the Economy?|url=http://economistsview.typepad.com/economistsview/2012/08/would-lowering-the-interest-rate-on-excess-reserves-stimulate-the-economy.html|work=Economist's View|accessdate=13 April 2013|date=August 27, 2012}}</ref><ref>{{cite web|last=Parameswaran|first=Ashwin|title=On The Folly of Inflation Targeting In A World Of Interest Bearing Money|url=http://www.macroresilience.com/2013/01/07/on-the-folly-of-inflation-targeting-in-a-world-of-interest-bearing-money/|work=Macroeconomic Resilience|accessdate=13 April 2013}}</ref>
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| In July 2009, Sweden's central bank, the [[Riksbank]], set its policy repo rate, the interest rate on its one week deposit facility, at 0.25%, at the same time as setting its overnight deposit rate at -0.25%.<ref name="sweden-negative-repo-table">{{Cite web|url = http://www.riksbank.se/en/Interest-and-exchange-rates/Repo-rate-table/|title = Repo rate table|accessdate = 21 August 2013|publisher = Sveriges Riksbank}}</ref> The existence of the negative overnight deposit rate was a technical consequence of the fact that overnight deposit rates are generally set at 0.5% below or 0.75% below the policy rate.<ref name="sweden-negative-repo-table" /><ref name=":0">{{Cite news |url= http://www.ft.com/cms/s/0/5d3f0692-9334-11de-b146-00144feabdc0.html |title=Bankers watch as Sweden goes negative |first1=Andrew |last1=Ward |first2=David |last2=Oakley |work=[[Financial Times]] |location =London |date=27 August 2009}}</ref> This is not technically an example of "negative interest on excess reserves," because Sweden does not have a reserve requirement,<ref>{{Cite web|url = http://www.imf.org/external/pubs/ft/wp/2011/wp1136.pdf|title = Central Bank Balances and Reserve Requirements|date = February 2011|accessdate = 5 October 2013|publisher = [[International Monetary Fund]]|first = Simon|last = Gray}}</ref> but imposing a reserve interest rate without reserve requirements imposes an implied reserve requirement of zero. The Riksbank studied the impact of these changes and stated in a commentary report<ref>{{Cite web|url = http://www.riksbank.se/upload/Dokument_riksbank/Kat_publicerat/Ekonomiska%20kommentarer/2009/ek_kom_no11_09eng.pdf|title = The lower limit of the Riksbank’s repo rate|date = 30 September 2009|publisher = Sveriges Riksbank|accessdate = 21 August 2013|last1 = Beechey|first1 = Meredith|last2 = Elmér|first2 = Heidi|format = PDF}}</ref> that they led to no disruptions in Swedish financial markets.
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| ==See also==
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| * [[Rate of return on investment]]
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| * [[List of countries by central bank interest rates]]
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| * [[Macroeconomics]]
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| * [[Short-rate model]]
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| ==Notes==
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| {{Reflist|30em}}
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| ==References==
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| {{Refbegin}}
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| * {{Cite book |title=A History of Interest Rates | first1 = Sidney | last1 = Homer | first2 = Richard Eugene | last2 = Sylla | first3 = Richard | last3 = Sylla |publisher=[[Rutgers University Press]] |year=1996 |isbn=978-0-8135-2288-3 |url=http://books.google.com/?id=w3hmC17-em4C |accessdate=2008-10-27 |ref=harv |postscript=<!-- Bot inserted parameter. Either remove it; or change its value to "." for the cite to end in a ".", as necessary. -->{{inconsistent citations}}}}
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| * {{cite encyclopedia |last1=Malkiel |first1=Burton G. |authorlink1=Burton Malkiel |last2= |first2= |authorlink2= |editor= [[David R. Henderson]] (ed.) |encyclopedia=[[Concise Encyclopedia of Economics]] |title=Interest Rates|url=http://www.econlib.org/library/Enc/InterestRates.html |year=2008 |edition= 2nd |publisher=[[Library of Economics and Liberty]] |location=Indianapolis |isbn=978-0865976658 |oclc=237794267 |ref=harv}}
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| {{Refend}}
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| ==External links==
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| * [http://www.worldinterestrates.info World Interest Rates]
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| * [http://www.mortgagenewsdaily.com/mortgage_rates/ Mortgage Interest Rates]
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| Historical interest rates can be found at:
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| * [http://wikiposit.org/w?filter=Finance/Interest%20Rates/ Wikiposit.org]
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| * [http://www.quandl.com/markets/us-interest-rates Comprehensive Historical US Interest rates]
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| {{Debt}}
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| {{economics}}
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| {{DEFAULTSORT:Interest Rate}}
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| [[Category:Interest rates| ]]
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| [[Category:Mathematical finance]]
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| [[Category:Monetary policy]]
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