It is a commonly accepted view these days that the central bank is a key factor in the determination of interest rates. By this way of thinking, the Fed determines the entire interest rate structure by influencing the short-term interest rates.

The central bank influences the short-term interest rates by means of the monetary liquidity. Thus, by buying assets the Fed adds to the monetary liquidity, thereby lowering rates. When it sells assets, the exact opposite takes place.

As someone who teaches public finance (better termed the economics of government), I can’t count how many times I have heard politicians promise “comprehensive” reforms to some major problem. But what such efforts actually produce is always different from what is promised, because such achievements are beyond government’s competence. The more comprehensive the “reforms” (say, measured by the number of pages in a bill), the more adverse incentives undermining social cooperation are created and the less freedom survives.

Philip Cortney (1895–1971) was a Franco-American entrepreneur, economist and business leader.

When Ronald Reagan officially announced his candidacy for president of the United States in November 1979, he called for the establishment of a large free trade zone encompassing the USA, Canada, and Mexico. Not surprisingly, the so-called free trade agreement better known as the North American Free Trade Agreement (NAFTA) resembled the usual “managed trade” that falls much more into the category of what Randall Holcombe calls “political capitalism.” Politics has a way of doing that.