Errors in determining the price of money do have fatal consequences.
When interest rates jump from, say, 2% to 4%, in terms of cashflow this means a doubling of expenditure on a regular basis. If your mortgage was X per month, it'll now be 2X per month, which will immediately affect the expenses you have for other goods, such as food, utility bills, etc. If your business loan repayment was Y per month, it'll now mean 2Y per month, meaning you may not be profitable anymore and go out of business.
The mistake you're making is thinking money is a thing that exists separately from real things, a unit of account and medium of exchange.
Money is a product in itself, that enables humans to go forward and back in time (through loans and savings) in order to plan the storage and use of the wealth they've created or are yet to create. Without this function, no wealth is created but the tiniest subsistence-level kind.
So, determining its price makes all the difference between an economy that operates at subsistence-level, or one that actually functions.
When interest rates jump from, say, 2% to 4%, in terms of cashflow this means a doubling of expenditure on a regular basis. If your mortgage was X per month, it'll now be 2X per month, which will immediately affect the expenses you have for other goods, such as food, utility bills, etc. If your business loan repayment was Y per month, it'll now mean 2Y per month, meaning you may not be profitable anymore and go out of business.
The mistake you're making is thinking money is a thing that exists separately from real things, a unit of account and medium of exchange.
Money is a product in itself, that enables humans to go forward and back in time (through loans and savings) in order to plan the storage and use of the wealth they've created or are yet to create. Without this function, no wealth is created but the tiniest subsistence-level kind.
So, determining its price makes all the difference between an economy that operates at subsistence-level, or one that actually functions.