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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Wildstar who wrote (88842)9/12/2007 3:09:24 PM
From: gpowellRead Replies (1) of 306849
 
Doesn't having the Fed as the lend of last resort distort the price of borrowing money?

Any entity acting as a "lender of last resort" is distortionary in that it allows transactions to take place that would not otherwise have occurred. This affects both prices and resource distribution. From a free market, libertarian, view, few would use the somewhat pejorative term "distortionary" to describe the presence of a market evolved lender of last resort - just as few would say the presence of any market participant is distortionary - even though it is an accurate statement for each and every one.

As for the Fed and its role as a lender of last resort, obviously it is not a "natural" entity in that its existence does not rely on its ability to exclusively serve a market function, consequently the distortion introduced by the FED, will (most likely) create a different price and resource distribution than a market evolved structure.
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