Sovereign borrowings are never “for free”. There are always opportunity costs, especially when there’s so much distortion favoring it.
Sir, you hold that “Fiscal stimulus can relieve monetary policy if invested wisely” “Governments must learn to love borrowing again” December 9.
“If invested wisely”, what a caveat, but so could private borrowing and investment help do. That is if they were allowed to access bank credit in a non-discriminatory way. As is much lower statist bank capital requirements when lending to the sovereign, has banks basically doing QEs acquiring sovereign debt, and this also implies bureaucrats know better what to do with bank credit they’re not personally responsible for, than for instance entrepreneurs.
It surprises when you state: “Central banks should not be blamed for loose monetary policy. As long as governments are not willing to expand on the fiscal side, central bankers are legally obliged to make up the shortfall in demand support” Legally obliged? Are you constructing a defense for all those failed central bankers that FT has so much helped to egg on? Because, as you yourself argue, “ultra-loose monetary policy has inflated asset prices and may be slowing productivity growth by keeping uneconomic businesses alive”, they sure have failed.
I also find it shameful to argue: “When governments can borrow for free there is little reason not to invest to the hilt.” What “for free”? The current low cost of government borrowing is the direct result of QEs and regulatory discrimination against other bank borrowers, and that distortion results in huge opportunity costs for the society. Also each new public debt contracted eats up a part of that borrowing capacity at a reasonable cost, which is an asset that should not be squandered away. Reading this editorial, which in summary begs for kicking the crisis can forward by any available means, makes me feel inclined to suspect you have no grandchildren.
Sir, finally, with governments borrowing to tackle “green transition challenges” you are opening up great opportunities for climate change profiteers, which will be exploited, you can bet on that. The more concerned you are with climate change the more concerned you should be with keeping all climate-change-fight financial/political profiteers far away. If not we will not be able to afford the fight against climate change, or to help mitigate its consequences.
@PerKurowski
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