Regulation: The Cause, Not the Cure, of the Financial Crisis

Question 1

What is one of the reasons that Roderick T. Long opposes anti- pricge gouging legislation

Answer 1

It disrupts the market ignals during shortages which would lead to investment and economizing In that sector.

Question 2

In a free market, what does a low interest rate signal and what does a high interest rate signal with regards to time-preference?

Answer 2

Low interest rates demonstrate a low time preference while high interest rates demonstrate a high time preference. For example, if I prefer to have money sooner and am unwilling to offer you a low interest rate for a long term investment, it demonstrates that I both have low trust in your capacity to pay back and that I’d prefer to get paid more sooner at the potential expense of losing your interest in taking me as a creditor.

Question 3

How do artifically decreased internest rates send the wrong market signals to investors?

Answer 3

It gives the wrongf impression that people have a low time preference and that therefore it is more sound to invest in longer term projects that are unsustainable, since the deferred consumption on which such projects depend is not actually going to be deferred. Such unsustainalb einvetment is the boom or the bubble; the bust comes when the unsustainability is recognized and a costly process of liquidation ensues.

Question 4

What is one of the greatest inequalities that arise when central banking schemes artificial produce more money?

Answer 4

Often, some sectors get the money first when facing the lower prices and other sectors get the new money last after they have begun to face the higher prices.