Monday, August 12, 2024

The importance of finance to economics

 


Economics without finance is like Hamlet without the prince. -  Claudio Borio

There is often the view that Wall Street can and should be separated from each other. The very dichotomy suggests that these are separate streets, yet the reality is that we cannot separate the two just like we cannot separate economics from finance. All macro decisions must include the price of time which is the rate of interest. All economic issues which describe saving decisions need finance. All businesses which need to fund operations need finance. All governments that run deficits need finance. Finance is more than oil in the engine of finance. It is the glue that helps push consumption either forward or into the future. This is even more important when we think about global development. The movement of capital to where it is needed is fundamental to economics and is the role of finance. 

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