What is a price? It basically is whatever the benefits the seller but is still low enough to benefit the buyer. However, what happens when we get the government involved? First, the government puts a price floor, which benefits the seller, buy making it so that the buyer can’t get a better deal. Then, to benefit the buyer, they place a price ceiling, which means that, if the seller can’t make a profit while selling below the price ceiling, he goes out of business, which destroys small business but benefits large companies that are super efficient and receive loopholes and government subsidies. Plus, what makes it really convenient, is that such companies can hire workers overseas in places like India and China at a fraction of the minimum wage. Here is a quote from this blog had to say about wages in China, and I recommend you read the rest of the post. Its really enlightening as to what wages are in China as of when it was written (2011). Its surprising they make even as much as they do!
The students who headed to the big cities (Mostly Guangzhou, Shenzhen and Dongguan) didn’t fair much better over the summer. Even working in a mobile phone factory (placing the screen into the case) only paid 7rmb/hour (~$1), but at the end of the month the company took food and rent (for the tiny factory dorm) out of the paychecks, leaving students with only about 4rmb/hour (~$.47). After an entire summer of working 60 hours a week, one student had only saved a few hundred dollars.
Thus, price controls don’t benefit the people at large: they benefit the large corporations by destroying the small people, which then forces people to buy from them. Luckily, there is another way: return to a true free market! In a free market, there wouldn’t be a coercive power forcing this on people. Price controls ARE people controls. When bureaucrats say that, “We’re here to control prices, not people,” they’re lying through their teeth in a lot of cases, if they know anything about economics. Prices should be thrown to the mercy of the free market; they’ll receive the best treatment they ever had, and benefit both the seller and the buyer.
In a previous post (Different Types of Loans and Interest Rates), I touched in the briefest manner on interest rates, why there are interest rates, and why there was variation in the amount of interest for different types of loans. Today, I would like to touch on a different aspect that is not often discussed; the civil government, and its interference in the banking system, and how that effects interest rates.
With the introduction of the Federal Deposit Insurance Corporation, a government “Corporation” that basically insures banks and their clients from loss. If the bank got robbed, the money would be returned by the FDIC. This and other intervention by the Federal Government has made it possible for banks, that, if they didn’t get a fair return on a loan, they would have this loss compensated by the state. This reduces the risk I mentioned of in that previous post. This, along with the Federal Reserve and it’s interventions, has caused interest rates to plummet significantly, which is good in the short term for borrowers, but strongly discourages saving.
What would happen if the FDIC and the Federal Reserve disappeared? What effect would this have on the market? First, we would go into a depression caused by the lack of stimulation, which has caused the market to make bad decisions that they otherwise would never of made. As part of this, interest rates would go up through the roof as the amount of money available to lend becomes nearly non-existent. Then, as the economy pulls itself out of the crash, the economy would grow, slowly at first, but in a few years would be growing fast and strong. So, in my opinion, even though it would hurt, pulling the intervention and aid from the economy would be of long term benefit. However, if we continue with it, the economy will eventually become too dependent on the state to get out of the crash, which is as of now, inevitable.
So, is the FDIC good? No. It may currently stimulate the economy, but in the long term, it will destroy the economy permanently. The same goes with the Federal Reserve. We need to allow the economy to grow and develop on its own. If this is allowed to happen, then we will be the beneficiaries of the richest economy on Earth, and bring the light of true, pure freedom, to the world.
Nooooo… Jar Jar becomes a Force ghost after Anakin Skywalker thought he did us all a favor. 😦
(Note: I don’t recommend Adult Swim or all of that channels Robot Chicken videos, I didn’t watch all of them because of some profanity or other vulgar stuff in some of them or their titles. However, this one was hilarious, and so I thought I’d share it.) 🙂
You may have wondered, “Why are there interest rates for different types of loans? Why are is there even such a thing as more than one kind of loan?” Well, I’m here to tell you what I’ve learned about loans and interest rates.
First, about different types of loans. There are many different types of loans; home loans, car loans, student loans, and credit card loans are some examples. The difference, between, lets say, a car loan and a credit card loan, is that, in a car loan, there is a car for the bank for own if the loan isn’t payed. So, if you can’t pay your loan on the car, not only does your credit plummet, but the bank has a car in its garage to be sold, to compensate it for its losses. However, the opposite is true in a credit card loan. The credit card has nothing it can get back from the loan, and so its risks are much higher. Thus, higher interest rates, as I will get to in a moment.
Now, about interest rates. Remember the example between a car loan and a credit card loan? Its about 3% for a car loan and 15% for a credit card loan at the time of the writing. Why? Remember the greater risk in a credit card loan? The way that credit card companies compensate for their losses is by having high interest rates, a sort of insurance without insurance. The reason why there are still interest rates for a car loan is because there isn’t a definite chance that the car will be sold. Note: Due to the Federal Reserve and other government intervention, interest rates are currently lower than they would be under these circumstances.
But what about the difference in interest rates for different lengths of loans? Well, consider this. What if the borrower lost his job about 15 years into a house loan. This most likely means that it is impossible for him to pay off his debt, and so the bank gets the house. Now, this risk is unknown, and the possibility of him being fired is not completely known to the bank. So, the interest rate. Depending on the length of the loan, more and more interest, or profit, is being payed in the first few years than in the final years of the loan. The shorter the loan, the less chance of something happening to the borrower, and the more principal payed in the early years over interest.
So that is your little talk about the difference between different types of loans; loans that are for a specific item that can refund the lender if the borrower is unable to pay off the debt, and the total opposite; the lender is dependent almost completely on the borrowers word and credit score. These types of loans are much riskier, and thus, the higher interest rates.
Hope this helped somebody! Have a good day!
This is an Essay for the Ron Paul Curriculum.
After the Battle of Actium 31 B.C. on the Ionian Sea, Augustus Ceaser returns to Rome. He knows that if makes a big show of being Emperor like Julius Ceaser, he is going to meet a grisly end. However, if he returns to private life, Rome will fall back into civil war. So, he makes a show of upholding the old Republic and its tradition. He goes to the Senate and makes a show of relinquishing his power in 27 B.C., but the Senate gives it back, gives him the title Augustus, a title that had never been given to a man before, made him Tribune for life, and put him in command of some of the largest provinces of the Republic. He is also given Imperium Maium, which gave him the power to override any provincial governor. Through all of this, he makes himself a sort of emperor by putting all these ancient offices in his hands, thus not declaring himself Emperor but having like power. During his life, he also attempted social reform among the higher classes, by punishing celibacy, encouraging marriage and childbirth, and punishing adultery severely. He ended banishing his own daughter, Julia, grandmother of Nero, for a scandal, as well as the poet Ovid, who was famous for his writings on love and seducing women, married or single, which obviously goes against the Augustan Settlements, as well as others, for their own scandals.
Augustus wrote his own biography, which is basically a big long list of his achievements. It has a list of how many temples and other monuments he constructed, the laws that he passed, the battles he won, etc; it is more like a propaganda line than an autobiography. Augustus was a rash, but powerful, politician that used everything he had, even his daughter, to advance his own political status. Julius Octavian Augustus Ceasar is a good example of a tyrant and a despot. He is a good warning of what is occurring today.
Literature. In other words: Books. Yes, the word that some dread, but it is a word that I “cherish,” perhaps more than the real world or the virtual, computer world of the modern era. The first book I actually remember reading other than my Bible Story book and the Bible itself, was With Lee in Virginia, by G.A. Henty. I was so excited, that I kept reading and reading. In fact, I would pronounce a bunch of words the way they sounded, like peasant as “peesant,” without feeling any remorse over the mispronunciation, until my family pounded into my head the correct way to say those words. The world was open before me, and I read all I could, even if I mispronounced a few words; so I probably don’t remember half of what I’ve read, whether important or childish. However, I will go briefly over a few books that have had the greatest impact on my life. (more…)