1.) Explain the basics of the Austrian theory of the business cycle. What is the difference, in terms of consequences, between lower interest rates that result from the saving choices of individuals, and lower interest rates that are achieved artificially, by a government-established central bank?
The Austrian theory of the business cycle basically dictates that in a free market, there is communication between the consumer and the producer which is translated through interest rates. As long as interest rates are not interfered with, they will read correctly to producers and allow them to meet the needs of their consumers reliably. However, when interest rates are interfered with and pushed down artificially by the central bank, there is no longer clear communication between producers and consumers. This lack of economic coordination creates conflict, and makes society poorer because labor and physical resources have been misallocated. The results of government intervention and false interest rates are recession and depression plagued upon the people.
2.) What are some of the pitfalls of industrial policy?
Industrial policy is what it is called when the government favors certain industries through subsidies, cheap loans, and other specific assistances. One of the biggest downfalls of industrial policy is the fact that it diminishes incentive within the favored business firms to be entrepreneurial. Another large issue with industrial policy is that it eliminates competition to a certain degree, and makes it more difficult for newer firms to compete against pre-established, government supported firms.
How much money won’t I have at age 70 if I keep watching TV? Is TV worth this?
For the past week, each day I have recorded the amount of time I have spent watching television. I had estimated that I would be watching around 15-20 hours of television a week; the total ended up being extremely close at 15 hours and 2 minutes. Now to calculate how much money I would be losing in this time, I decided to multiply 15 hours (a week) by 4; this left me with 60 hours a month lost to television. I then plugged this information into a compound interest calculator at $1200 dollars a month (assuming I would be making $20 an hour at the very least running my own business), with 53 years to grow at a 10% interest rate. (I am 17 years old right now, so in 53 years I will be 70 years old. Because the compound interest calculator does not accept $0 as a current principle, I was left to enter $1.) At this rate of television viewing, by the time I am 70 yeas old, I will have lost $22,355,756.67! Now that is a lot of money!
Exercises like this help people such as myself realize how valuable time really is, and more specifically, how much downtime will cost you in the long-run! Who needs a few hours of relaxation every night if you can spend the better portion of your life relaxing because you spent those extra hours working. Television is absolutely not worth the cost, however to be fair, I do find myself watching more sermons, speeches, and outreach missions than meaningless television shows. I use the majority of my television time to learn, and expand my understandings of The Bible and God’s world around me. This learning time is important to me; it has a lot of value to me in an informational sense, as well as a relaxation sense. There will always be trade offs between time and money throughout each persons lifetime; value however is subjective, and so this is a decision each person needs make for themselves.
Government regulation is law, (or laws) that dictate how a business is allowed operate. Implementing each and every one of these regulations costs money; millions and millions of dollars of it. When the government gets low on funds, they have a few options – all immoral and coercive, but options none the less. The most commonly chosen of which would be to rack up taxes; so not only are needlessly restrictive regulations being forced upon every business, but the money stolen from that very same businesses’ employees is being used to fund this very demise.
Interest rates are the outcome of market supply and demand; they display and guide producers as well as consumers. However in a government regulated market, there are false interest rates due to price floors and ceilings. The federal funds rate distorts market outcomes, and between the buying and selling of securities, bank interest rates can be forced both up and down.
In short, all government regulation screws with the market. All government regulation is deceiving and distorting of true market statistics.
One regulation in particular that I thought was quite a gem came about in January of 2010. Being a Massachusetts native myself, I was intrigued and saddened. “New Tooth Brushing Regulations to Take Affect.” Really? Come on… The regulation states that any child who consumes a meal (or spends more than 4 hours) in daycare is mandated to brush their teeth (although parents can opt out of this). Now, I know what you’re thinking- there’s worse things out there that the government is doing, why is this suddenly so concerning? Well, the answer is found directly in the ingredients of this recipe for disaster; fluoride. Not only has this wrongfully branded neurotoxin been found to have negative and harmful affects on the body when ingested or applied topically, but it has also been linked to lower IQ’s in children, and even brain damage. According to an interview with worker Nicole Chan at a Needham, MA daycare center, “We’re providing the toothbrushes, the holders, the cases and the toothpastes, as well,” which guarantees folks, that fluoride is included in your child’s state mandated health package. Dr. Maria Georgaklis, a pediatric dentist who works at Cleveland Circle Dental Associates says “parents should embrace the regulations” (WCVB). We the government as a coercive and violent organization believe we can raise your children better than you can; embrace that. We are going to pump your children full of fluoride contaminated water and deplete their IQ’s starting as a toddler by brushing their teeth with fluoride every day in school. Embrace it, because one day you’ll be so brainwashed that you won’t have to – you’ll be it.
Consider where your money goes each month when it’s torn from your paycheck. Consider what is causing market rate drops and skyrockets. Consider what is going into your body and that of those you’re responsible for. Do not blindly follow anything, or anyone; and do not compromise your life, liberty, (property) or pursuit of happiness, ever.
As an upcoming adult, I have begun my own research in bank loans and interest rates. What was most apparent to me in the early stages of my searching was that different types of loans have different interest rates. At first this was confusing – money is money, so it shouldn’t matter what it’s for…right? Wrong. If you’re a bank, everything matters; especially the likelihood of a borrower paying off every penny they owe. This is decided based on a person’s credit score. On paper, the bank can look at a credit score scale, and place you on it according to how you have built, or broken down your credit throughout your financial lifetime. Someone with a high credit score will be more likely to pay back a loan to the bank in full, where as someone with a low credit score would be considered a high risk borrower. Having good credit is crucial; and having no credit could mean being turned away as well.
Once you have been approved for a loan, interest rates are tacked onto what you would have originally been paying back. Interest rates vary depending on the economy, area, credit, and most importantly, what the loan is specifically for. According to Bankrate.com, the current 30-year fixed mortgage interest rates in the Boston, MA area range from 3.75% – 4.23%. However, this is barely comparable to Boston, MA auto loan rates, with (APR) interest stretching from 1.99% at LightStream to as high as 7.99% at the Rockland Trust Company. Student loans in the Boston, MA area vary from as low as 2.25% to as high as 10.4%, and seem to be the most heavily influenced by credit alone.
Another reason that different types of loans have different interest rates is due to the ability to repossess. Car loan interest rates tend to be lower than student loans because, if you don’t pay off your car, the company you borrowed the money from can (and will) come take the car back. However, if you’re borrowing money to pay off classes, the money is gone once you get it. There is no way to repossess the money that you owe someone if you don’t have the money in the first place. This is where loans get risky for the lender, and they must rely on your credit score to ring true. Another way to avoid such a large risk of never being paid back is by taking collateral from the borrower until the money owed is paid off. If the money is never paid back, the lender can take the item that was of equal or lesser value and sell it to gain back a portion of the profit they lost.