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SquirrelEStuff's avatar

If we operate in a "free market," how come the "fed" sets interest rates and not the market?

Asked by SquirrelEStuff (9171points) June 4th, 2008 from iPhone
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8 Answers

soundedfury's avatar

Well, the answer is that we don’t operate in a free market economy, it is highly regulated. But you might want to read up on the Federal Reserve system, as the Fed doesn’t set ALL interest rates, just those that are tied to certain federal funds.

susanc's avatar

Who told you we operate in a free market? Interesting.

marinelife's avatar

The common phrase “free market” means in comparison to other systems, such as communism in which the state controls industries, sets prices and dictates supply. In this country, industries are privately owned, pricing is supposed to be independent. There are lots of exceptions, though, such as utilities for which the government regulates pricing while allowing a monopoly provider in addition to your example of the Fed setting the prime lending rate.

SquirrelEStuff's avatar

Im just having a hard time understanding how we are free in this country, as I was taught in school. I graduated HS in 2000. Maybe I am just naive, but I feel like this whole “America:Land of the Free, Home of the Brave” thing is kinda BS.

Maybe, We the People, can take this month leading up our 230th year of Independence, to realize the type of “free land” you are leaving your kids. Dont just go and get drunk, go get drunk and get mad. We are getting screwed left and right by this fascist theocracy we call a government. Dont just live your lives thinking you are free just because your tv tells you you are.

marinelife's avatar

Flawed though it may be, I prefer it to most alternatives, for example, Myanmar.

SquirrelEStuff's avatar

I don’t get how people are so willing to settle. It kinds makes me sick. I always wanted kids, but when I see what this place is becoming, and how people like you respond, its almost as if there is no hope. If Obama was this hope, Rupert Murdoch would have censored him the way he did Ron Paul.

mirza's avatar

Well first of all we operate in a command economy. Why does the fed set interest rates ? Its to control market speculation and maintain a stable economy. One of the reasons why the fed came into existence is to control business owners from playing with the stock market for their benefit. Remember how the widespread speculation led to the Panic of 1907. The fed came into existence to stop such acts.

Quiet frankly, I dont think their should be a free market. The government should have some control over the economy. Can you imagine, what people like Murdoch would do the lives of regular people for profit ? Regulation helps keep some balance.

Getting mad is not the answer to the problems. I have nothing against Ron Paul except the fact that he is a radical. You cannot expect to try to change everything at once, chance has to come in small increments. America had a whole generation of young people who were mad at the government – the so-called hippies. But their protests didnt stop the war in vietnam. In fact in my mind, they didn’t do anything. To change things, you need to work with other people and they have to agree with you. For example, most of JFK’s “New Frontier Policy” were turned down by the republican Congress because he sucked at proving his case. His successor, Johnson on the other hand was able to get quiet a few of the policies passed because he knew his way around congress.

Yes this country is flawed but I would not want to live in any other country. Theres no Utopian country in the world where everything is perfect. Yes certain things are wrong in this country. But I am not going to get mad at the government for messing up because doing so would not result in anything useful and might result in me being arrested. Instead, I want to change things in this country. So I am currently taking a lot of classes on politics and economics. In five years or so, I am going to run for office and hopefully someday try to become a senator so that atleast i can try to change things. As FDR said “_“It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”

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