November 26, 2015

Martin Wolf, the government’s favorable borrowing terms come at extremely high costs, especially for our young.

Sir, Martin Wolf insists again in that the government should take advantage of very “favourable terms” to borrow so as to invest [in infrastructure]. "The same destination but a gentler route" November 26.

Again Wolf simply cannot understand (or does and turns a blind eye to it) that those “favorable terms” do not come cheap. 

The low interest rates result much from favoring the government’s access to bank credit over that of the private sectors, and especially over that of those perceived as risky, like SMEs and entrepreneurs. Therefore its cost is a road littered by private initiatives that never got the bank credit these needed to be tried out. Our young, who forever will see their employment opportunities seriously diminished by this, will, when they discover what has been done, not look favorably on those responsible for it, and on those silencing it. 

To think, as Martin Wolf obviously must do, that a government bureaucrat is more capable of efficiently using bank credit that he is not personally responsible to repay than citizens, can only be explained from an ideological point of view. He surely must be a statist, one of those who want austerity to be imposed on banks, but decries it when it touches the government.

Does that mean I disapprove governments investing and financing infrastructure? No! But, when evaluating projects, governments should not use the currently subsidized public borrowing rate as their reference.

@PerKurowski ©