Trying to understand the Fed interest rate...

[LibertiORDeth]

Can someone explain what the fed interest rate does, and the effect on the economy?

To my understanding, lowering it lowers interest rates at banks, so people can buy more for less interest?

[OptionsTrader]

Here's a decent description. It is a bit Keynesian in opinion, but it is mostly accurate.

http://abcnews.go.com/Business/story?id=3535117&page=1

[LibertiORDeth]

So it artificially pumps up the economy?

[OptionsTrader]

So it artificially pumps up the economy?

The motivations and effects are more insidious than one sentence can explain.

I suggest reading the following:

http://www.mises.org/books/goldpeace.pdf

[hawks4ronpaul]

The Fed is a price-fixing cartel, fixing the price of money (interest rate), i.e. the type of monopolistic behavior for which the government would sue Microsoft or imprison you.


http://hawks4ronpaul.blogspot.com/

[acroso]

The Fed controls the inflation rate...that's all there is to know. They print money.


...you might want to learn the basics of the phillips curve and its associated elasticities if you want to learn more detail..

[Paulite]

the fiat empire

watch the entire documentary on youtube.