AcesAndEights
AcesAndEights
Joined: Jan 5, 2012
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June 8th, 2012 at 11:33:20 AM permalink
Quote: bigfoot66

Rand is also a bit less committed to 100% libertarian purity, noticed that he just endorsed Willard Romney, a move dad would never make.


Really, that makes me sad. Of course, last election season, Ron Paul actually endorsed Chuck Baldwin from the Constitution Party, which was just ridiculous. (Look it up if your curious, but the Constitution party is nothing like the libertarians, their ideas are very authoritarian in nature.) He didn't endorse Bob Barr (running for the Libertarian party) due to some political scuffle they had. Kind of pissed me off as RP is generally more genuine and anti-politician BS than most politicians.
"So drink gamble eat f***, because one day you will be dust." -ontariodealer
vert1276
vert1276
Joined: Apr 25, 2011
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June 8th, 2012 at 11:49:54 AM permalink
2 things that make it impossible for me to vote for Ron Paul are.......1) he wants to get rid of the Federal Reserve.....2)He wants to get rid of fiat currency and go back to a true gold standard.....These two ideas are so horrible, I could never bring myself to vote for the man...
bigfoot66
bigfoot66
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June 8th, 2012 at 12:48:30 PM permalink
While we believe the fed should be abolished, Dr Paul has merely proposed that legal tender laws be repealed. You think the dollar is wonderful , I don't, and that's ok. What's not ok is that it is illegal to use a competing currency. Google "liberty dollar". Even the most Keynesian of us has to think it is wrong to jail a man for using the money of his choice.

That said, the federal reserve is a system that inflates away the value of our money. This is a form of theft (some call it taxation).

Some people on this board are likely old enough to have lived through price controls and they have seen the chaos that it causes. The Fed manipulates interest rates. The interest rate is the price of money over time and it serves to coordinate production over time in a free market. Manipulating interest rates is even more damaging than manipulating the prices of goods or services.

Since this is a Vegas forum I will use the example of a multi-billion dollar strip resort, such as City Center, Echelon, Wynncore, etc. I am not familiar with the details how the Wynn was built but will make up a reasonable senario to illustrate the point. Mr Wynn wants to spend $3 billion to build his resorts. He has to borrow money to make this happen and has a 20 year financing plan. Borrowing this much money over this period of time means that even small changes in the interest rate causes very large changes in the cost of the project after 20 years of borrowing funds. Can you imagine how risky it is to build City Center if the interest rate is 20%? The problem is especially compounded on long term projects like huge resorts where you are repaying the money over decades. If the Fed sets the interest rate too high, then the cost of financing huge resorts becomes too high and there are too few.

On the other hand, if the Fed sets interest rates too low, then too many of them are built (or at least started...) because of the discount. During a boom period of artificially low interest rates, a lot of big resorts were started. Eventually, the over investment becomes obvious and a lot of projects are simply abandoned as it becomes clear the growth was unsustainable.

This is why fixing interest rates causes economic problems, it steers resources into the wrong investments.
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bigfoot66
bigfoot66
Joined: Feb 5, 2010
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June 8th, 2012 at 1:28:40 PM permalink
Quote: vert1276

2 things that make it impossible for me to vote for Ron Paul are.......1) he wants to get rid of the Federal Reserve.....2)He wants to get rid of fiat currency and go back to a true gold standard



For the record, he does not advocate returning to a gold standard, though I understand why you might think that he does. He argues that we should be free to use whatever currency we want to, but gold has historically been chosen to serve as money.
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vert1276
vert1276
Joined: Apr 25, 2011
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June 8th, 2012 at 4:45:52 PM permalink
Quote: bigfoot66

While we believe the fed should be abolished, Dr Paul has merely proposed that legal tender laws be repealed. You think the dollar is wonderful , I don't, and that's ok. What's not ok is that it is illegal to use a competing currency. Google "liberty dollar". Even the most Keynesian of us has to think it is wrong to jail a man for using the money of his choice.

That said, the federal reserve is a system that inflates away the value of our money. This is a form of theft (some call it taxation).

Some people on this board are likely old enough to have lived through price controls and they have seen the chaos that it causes. The Fed manipulates interest rates. The interest rate is the price of money over time and it serves to coordinate production over time in a free market. Manipulating interest rates is even more damaging than manipulating the prices of goods or services.

Since this is a Vegas forum I will use the example of a multi-billion dollar strip resort, such as City Center, Echelon, Wynncore, etc. I am not familiar with the details how the Wynn was built but will make up a reasonable senario to illustrate the point. Mr Wynn wants to spend $3 billion to build his resorts. He has to borrow money to make this happen and has a 20 year financing plan. Borrowing this much money over this period of time means that even small changes in the interest rate causes very large changes in the cost of the project after 20 years of borrowing funds. Can you imagine how risky it is to build City Center if the interest rate is 20%? The problem is especially compounded on long term projects like huge resorts where you are repaying the money over decades. If the Fed sets the interest rate too high, then the cost of financing huge resorts becomes too high and there are too few.

On the other hand, if the Fed sets interest rates too low, then too many of them are built (or at least started...) because of the discount. During a boom period of artificially low interest rates, a lot of big resorts were started. Eventually, the over investment becomes obvious and a lot of projects are simply abandoned as it becomes clear the growth was unsustainable.

This is why fixing interest rates causes economic problems, it steers resources into the wrong investments.



The Fed doesn't "set" the prime rate, the market does
Nareed
Nareed
Joined: Nov 11, 2009
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June 8th, 2012 at 5:08:56 PM permalink
Quote: vert1276

The Fed doesn't "set" the prime rate, the market does



Same difference. The Fed sets the discount rate upon which all other rates are set.
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bigfoot66
bigfoot66
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June 8th, 2012 at 5:38:04 PM permalink
Quote: vert1276

The Fed doesn't "set" the prime rate, the market does



They do not 'set' commercial interest rates per say. I was trying to be very simple to explain Austrain business cycle theory. Surely you are not denying that they have a heavy influence on interet rates. Are you just trying to point out that I made a small technical error in my explanation?
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vert1276
vert1276
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June 8th, 2012 at 6:36:15 PM permalink
Quote: Nareed

Same difference. The Fed sets the discount rate upon which all other rates are set.



how do you figure that?
vert1276
vert1276
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June 8th, 2012 at 6:42:58 PM permalink
Quote: bigfoot66

They do not 'set' commercial interest rates per say. I was trying to be very simple to explain Austrain business cycle theory. Surely you are not denying that they have a heavy influence on interet rates. Are you just trying to point out that I made a small technical error in my explanation?



I don't think they have a "heavy" influence on setting the prime rate.....Of course they "set"(for lack of a better word) the federal funds rate and the discount rate....I can say the discount rate has NOTHING to do with the prime rate....A small case could be made for the federal funds rate having some effect on the prime rate since the federal funds rate in manipulated by the Fed by increasing and decrease bank liquidity...But the two are not linked.....Just because one falls or increases doesn't mean the other will....Risk and inflation have much more to do with where the prime rate will "land" than what the Fed does with the federal funds rate
bigfoot66
bigfoot66
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June 9th, 2012 at 9:27:24 AM permalink
Well I respectfully submit that if you think the Fed's actions do not have a big influence on commercial interest rates that we probably won't get very far in a discussion.

http://www.lendingtree.com/mortgage-loans/advice/getting-the-best-loan/affect-of-fed-on-interest-rates/

Quote:

By influencing the federal funds rate, the Fed can impact consumer interest rates charged by banks on all types of loans, from car loans to credit cards. Generally, when the Fed raises rates, your cost to borrow money goes up. This affects many consumers directly, as interest rates on credit cards and home equity lines of credit are not usually “fixed” like a mortgage, and thus the rate can increase or decrease along with the Fed’s actions.



The way this website puts it is very concise and accurate. BTW you are absolutely right that risk and inflation are important factors as well.

Will you admit, at least, that you were wrong when you claimed that he advocates returning to the gold standard?
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