Reply To: Yield Curve


So I was reading Part IV about your critique of Rothbard’s explanation of the yield curve in the ERE. It makes sense that, all else equals, people prefer to have their money tied up for shorter lengths of time than longer lengths of time. Most people may prefer to have a 1 year 5% bond rather than a 5 year 5%, so there may be a premium (or differential) in the interest rate to entice people to hold longer term bonds. My question would be, can’t these bonds be bought and sold though? Even in an ERE, wouldn’t an investor buy a 5 year 7% bond and sell it when he needs the money? This would seem to be a tendency to keep the yield curve horizontal in the ERE.