Comments on: Ron Paul – Is He Opposed to Low Interest Rates? http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/ Tue, 06 Jan 2009 11:37:19 +0000 http://wordpress.org/?v=2.2.1 By: Brian Moore http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-8 Brian Moore Wed, 12 Sep 2007 23:08:39 +0000 http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-8 Your final statement is correct about Ron Paul's position. While one could nit pick at his comment and say in that specific instance he didn't use the key word "artificially" in front of the word low, that is indeed what he meant. Austrian economic theory holds that the market is best at setting interest rates and that to distort the interest rate will lead to over or under investment. In the case of low interest rates you get over investment, that is a higher investment in riskier projects that would not have been invested in had the market been allowed to set the interest rate. This leads to a business cycle. If Ron Paul were for high or low interest rates in and of themselves, he would be FOR the Fed and not against it. He just wants the rate to float on the market. Your final statement is correct about Ron Paul’s position. While one could nit pick at his comment and say in that specific instance he didn’t use the key word “artificially” in front of the word low, that is indeed what he meant. Austrian economic theory holds that the market is best at setting interest rates and that to distort the interest rate will lead to over or under investment. In the case of low interest rates you get over investment, that is a higher investment in riskier projects that would not have been invested in had the market been allowed to set the interest rate. This leads to a business cycle.

If Ron Paul were for high or low interest rates in and of themselves, he would be FOR the Fed and not against it. He just wants the rate to float on the market.

]]> By: Dan http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-7 Dan Wed, 12 Sep 2007 22:18:25 +0000 http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-7 It would seem to me that Ron Paul's objection to the Federal Reserve may lie in the fact that the Constitution does not allow it. Much like everything Mr. Paul speaks against, if it's not in the Constitution, the Federal Government can't legally do it. It would seem to me that Ron Paul’s objection to the Federal Reserve may lie in the fact that the Constitution does not allow it. Much like everything Mr. Paul speaks against, if it’s not in the Constitution, the Federal Government can’t legally do it.

]]> By: s http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-6 s Wed, 12 Sep 2007 21:11:42 +0000 http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-6 You should check out the following example: http://www.auburn.edu/~garriro/ivan.ppt Ivan is a representation of the interest rate and the supply of bricks represent the available resources in the economy. What happens is Ivan exaggerates the number of available bricks. Based on Ivan's count of bricks, construction is begun on 6 houses. Eventually it becomes apparent that there are not enough bricks to complete all the projects. At that point, 2 houses have to be dismantled and bricks redirected to complete the other houses. Thus instead of building 5 houses, you try to build 6 and end up with 4. So if Ivan (the interest rate) lies, the incorrect number of projects will be undertaken, leading to an inevitable correction (business cycle). Ron Paul is against such lies, aka artificial interest rates. You should check out the following example:

http://www.auburn.edu/~garriro/ivan.ppt

Ivan is a representation of the interest rate and the supply of bricks represent the available resources in the economy.

What happens is Ivan exaggerates the number of available bricks. Based on Ivan’s count of bricks, construction is begun on 6 houses. Eventually it becomes apparent that there are not enough bricks to complete all the projects. At that point, 2 houses have to be dismantled and bricks redirected to complete the other houses. Thus instead of building 5 houses, you try to build 6 and end up with 4.

So if Ivan (the interest rate) lies, the incorrect number of projects will be undertaken, leading to an inevitable correction (business cycle). Ron Paul is against such lies, aka artificial interest rates.

]]> By: dave http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-5 dave Wed, 12 Sep 2007 18:54:57 +0000 http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-5 This is so wrong! The reason that we have such low interest rates is because the fed continues to devalue the dollar. When the dollar is worth less and less, the banks must increase the incentive to borrow from them. IE:lower interest rates! No fed = valuable dollar = borrowing less This is so wrong!
The reason that we have such low interest rates is because the fed continues to devalue the dollar. When the dollar is worth less and less, the banks must increase the incentive to borrow from them. IE:lower interest rates!

No fed = valuable dollar = borrowing less

]]> By: Chris http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-4 Chris Wed, 12 Sep 2007 18:51:19 +0000 http://financialpizza.com/2007/09/12/ron-paul-%e2%80%93-is-he-opposed-to-low-interest-rates/#comment-4 Ron Paul is opposed to central economic planning. If the market is left free of external control/meddling, then it will naturally find the right interest rate. Simply labeling Ron Paul as being against low interest rates is false. Low interest rates are GREAT... if they are an accurate reflection of true market prices. Ron Paul is opposed to central economic planning. If the market is left free of external control/meddling, then it will naturally find the right interest rate. Simply labeling Ron Paul as being against low interest rates is false. Low interest rates are GREAT… if they are an accurate reflection of true market prices.

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