Some, perhaps off-the-wall thoughts about Interest Rates

These are presented here to stimulate discussion. The author came up with these thoughts while he was studying and writing about money and banking. The author has very little data to bolster most of these statements and he will probably run if good counter-arguments are presented. But we will at least be left with those counter-arguments.

Perhaps it might be best to consider these statements to be questions. The author would be happy to rewrite them in the form of questions -- if prompted.

1. It is thought that the Federal Reserve System controls interest rates in the United States -- but that is far from the truth. The control of interest rates is mostly illusory -- it might be fair to say it is a hoax.

2. The Fed has absolutely no control over interest rates between companies, private individuals and corporations. Those interest rates are strictly determined by the negotiated contracts between the people involved.

3. The Fed has no control over what banks can charge each other -- other than setting the Fed Funds Rate which is the suggested overnight rate of interest between banks that belong to the Federal Reserve System. And as I understand that -- the banks can ignore that rate.

4. The Fed can’t set the interest rates on government bonds. Under the present system - those rates are (poorly) determined by an quasi-open market.

5. With regard to interest rates on government bonds; In my opinion -- the government should never borrow money -- it should always create whatever money it needs and thereby save the interest it now pays. Such money creation is mandated and therefor approved by the Constitution and Common Law that stretches back to the days of Sovereign States.

6. If such a system of direct money creation by the government were attempted, all kinds of so-called experts on the subject will undoubtedly come out of the woodwork and claim that allowing the government to create money would guarantee runaway inflation.

7. I think that objection (from # 6 above) is total nonsense. The government can easily be controlled by Laws that mandate money can only be created for projects that will each reasonably be expected to pay for itself over some period of time less than 10 years. That will not be inflationary in the least. The created money can either be spent or lent into the economy. Either way will work.

8. Is it better for (a) the government to create money out of thin air or (b) the Federal Reserve to create money out of thin air and lend it to the government? We now use (b). That is a travesty of sound capitalistic principles and an abomination.

9. Legislation should be passed that will allow Congress to set government interest rates when the government lends money for various national projects.

10. When and if the government borrows money -- the interest rates should be a result of negotiations between the government and lenders. The government should rarely have to borrow. If it ever borrows, it should be for the benefit of the borrower.

Please consider the writer to be a well-meaning gadfly (figuratively, an annoying person, esp. one who provokes others into action by criticism).

--Martycarbone 09:09, May 21, 2009 (PDT)

By the money datevaluation the money price must go cheaper and cheaper. ...

Suggestion by FilipeAlvesFerreira on 2008-08-06 22:05:24

By the money datevaluation the money price must go cheaper and cheaper. Because more and more the investment's substitute is the cash with the linked money or personalized money into Economy 4G3W

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Amex is threatening 38% interest rates on accounts of people making parti...

Suggestion by 209.94.140.99 on 2008-03-18 18:01:56

Amex is threatening 38% interst rates on accounts of people making partial payments.

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How will lower interest rates affect bonds?

Suggestion by 162.39.214.1 on 2008-01-30 20:59:25

How will lower interest rates affect bonds?

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American mortgages trade as a spread over LIBOR rates, not Treasury yields as the graph implies. Cmcfarland 02:33, October 30, 2007 (PDT)


I undid darv gosal's changes which said the Fed was expected to keep lowering interest rates due to our policy on forecasting. Parkerconrad 14:43, November 6, 2007 (PST)

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