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Liberty News ForumLNF Forums HereEconomics, Financial News › - should there be free market interest rates without the Fed setting it?
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Hot Topic (More than 10 Replies) - should there be free market interest rates without the Fed setting it? (Read 1,840 times)
petep
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Re: - should there be free market interest rates without the Fed setting it?
Reply #10 - Apr 6th, 2016 at 5:05pm
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admin wrote on Apr 6th, 2016 at 2:25pm:
- how do you explain competing rate/ deals on mortgages and credit cards?


banks are borrowing money from the fed, and when they (banks) borrow they commit to certain amounts at certain rates...much like if you are a coffee buyer...you commit to buy x at a certain price, so if you buy 3 months of coffee and the price drops suddenly, you are locked in at the higher rate and your prices generally reflect that...

if their portfolio is strong, also, a lender may drop rates to be more competitive...
  
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Re: - should there be free market interest rates without the Fed setting it?
Reply #11 - Aug 6th, 2016 at 4:41pm
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admin wrote on Apr 6th, 2016 at 3:13am:
- should there be free market interest rates without the Fed setting the rates or influencing it?

Yes.

admin wrote on Apr 6th, 2016 at 3:13am:
- why aren't rates determined by the market?

Well they are in part.  Banks add their own rates on top of the Fed's rate.

admin wrote on Apr 6th, 2016 at 3:13am:
- how would it work and what effects would it have?

The Fed's rate would simply be removed so that the lender's rate is all that's left.

admin wrote on Apr 6th, 2016 at 3:13am:
- what do you think the rates would currently be?

If there is enough competition to overcome collusion then interest rates should go down over time, or stay the same for an extended period.
  

Proud FairTax supporter.
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Re: - should there be free market interest rates without the Fed setting it?
Reply #12 - Nov 23rd, 2016 at 1:02pm
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admin wrote on Apr 6th, 2016 at 3:13am:
- should there be free market interest rates without the Fed setting the rates or influencing it?

Absolutely.  But you can't have a free market as long as there are monopolies and the Fed is a monopoly.

admin wrote on Apr 6th, 2016 at 3:13am:
- why aren't rates determined by the market?

They are in part. Commercial banks add their own rates on top of the Fed rate.

admin wrote on Apr 6th, 2016 at 3:13am:
- how would it work and what effects would it have?

1. Abolish the Fed
The first step is getting rid of the Fed and increase competition by lowering or eliminating barriers to new banks.

2. Abolish Fractional Reserves
The Fed was created to protect commercial banks from bank runs which was a hazard during the gold standard because commercial banks were all allowed to lend out all but a small fraction of total deposits which put deposit holders at risk of losing their gold.

admin wrote on Apr 6th, 2016 at 3:13am:
- what do you think the rates would currently be?

As long as there is sufficient competition to prevent collusion, rates would be very low and banks would probably be using simple interest instead of compounding interest.
  

Proud FairTax supporter.
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