January 22, 2013
Sir there is no question Lawrence Summers' recommendations for increased investments by the US Government is based on the government´s capacity for borrowing “at near-zero real rates of interest”, “End the damaging obsession with the budget deficit” January 22.
But why is he unable to see the real present danger in that the government is being able to borrow “at near-zero real rates of interest”? Is that something natural? Is that healthy? Of course not!
If the banks had to, as they should, hold just as much capital when lending to a “risky” citizen than when lending to “the infallible” government, then the current interest rate on US government debt, often the approximation of the “risk-free rate”, would be higher, as it would not have the benefit of this regulatory subsidy.
It is only if the regulatory taxing of “The Risky”, which subsidizes “The Infallible” is eliminated in the US, "The land of the brave", that its economy can start breathing freely again and grow sturdy... and this, of course, goes for Europe too.