By Tierra Negra, Courier Special Correspondent
In the old days, students in Mexico had to do a thesis after finishing college to officially obtain a “bachelor degree”. Other options have been created since then but, at that point in time, I started a research paper on money market because the financial sector was being deregulated (in preparation for the NAFTA treaty) producing a boom of institutions that started to share banks functions. I was never able to secure a job in this sector forcing me to quit its completion but here are some of the basics I learned.
First of all, money does not have the same value in the present than in the future because of the interest and inflation rates. If I want to buy a car that costs $20, 000 but I have to borrow the money I will be paying an interest which will increase this amount. Same wise, if I have money that I decide not to spend now it will be gathering interest in the bank and I will have a larger amount in the future. The interest is the “cost” of money. Inflation produces a similar effect because you buy less with the same amount of money after a certain period of time.