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Very interesting - Interest Rates, part 1

  • Oct 28, 2013 · 7:30 PM
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What causes the interest rates we observe in the real world?  It's a very interesting subject indeed.  In the Austrian view (and under a non-fiat money system), interest rates reflect the "time preference" of economic actors, the perceived urgency of the needs in an economy.  Loanable funds available to borrowers increase when an economy has its most immediate needs taken care of and this lowers interest rates so more long-term investment takes place.  However, there are other theories of interest rates and the actions of a central bank certainly affect the situation.  We may do this discussion in multiple parts.  My intent for at least the first part is to discuss how interest rates work in a free market in money & banking.  We will discuss other views after that.

Readings:

The Mystery of Banking - Rothbard - chapters 6, 7, 8 (part 1 of discussion on Oct. 28th)

The Mystery of Banking - Rothbard - chapter 9 (part 2 - later)

http://mises.org/Books/mysteryofbanking.pdf

http://www.bankrate.com/finance/cd/how-interest-rates-are-determined.aspx (part 2 - later)

I will likely update the reading list once more before we meet.

Voluntarily,

=Joel

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