January 23, 2013
Sir, if I would turn a blind eye to the fact that the interest rates the US pays on its government debt is subsidized by means of generating for the banks much lower capital requirements than for all other bank lending, then I would in general terms agree with Martin Wolf’s “America’s fiscal policy is not in crisis”, January 23.
But I do not turn a blind eye to the insidious and not so transparent regulatory discrimination which is making all bank borrowings much more expensive for all the “risky”, those who act on the margins of the real economy and those who are indispensable in order to generate tomorrow’s jobs, tomorrows fiscal revenues, and, why not, tomorrows “absolutely not risky” borrowers.
And neither do I turn a blind eye to the fact that the artificial “zero interest rates”, though of course a blessing for the government of turn, is creating big earning holes elsewhere in the economy, which will catch up on us all sooner or later.
This of course does not stop me from agreeing 100 percent with Wolf on the need for sensible reforms that contains the costs of the health sector, before the reforms called for might be truly insensible to the needs of the citizens.
PS. Since the US public debt is often used as an approximation for the risk-free rate, you should notice that what is believed to be the “risk-free-rate” is actually the “risk-free rate minus the subsidies provided by discriminatory bank regulations”. And so the reading of one of the most important instruments when trying to navigate our economies is completely wrong… and, for the record, that has a cost too.