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The wasted opportunity of the government not investing this free money into the economy's infrastructure is infuriating.

by guelo 11y ago

AnimalMuppet 11y ago
This isn't free money. The interest is free. The principle still needs repayment. The government could in fact profitably invest a bunch of money in infrastructure. The problem is that the government invests, not where investment is needed, but instead where Congress politically decides to invest money. The results tend to be... sub-optimal. Is this a good opportunity for the government to invest in needed infrastructure? Yes, definitely. Is it a good opportunity for Congress to decide to spend a bunch more money? Not in my book.
- saalweachter 11y ago
  A 0% nominal interest rate combined with a positive inflation rate is a negative real interest rate. Money borrowed at a negative real rate isn't free, of course, but it is on sale. If we have a billion dollar project that needs to be done, you could save ~five million by spending the money today and paying for it three months from now.
  - guelo 11y ago
    There's also the return on investment of the new infrastructure.
- JoeAltmaier 11y ago
  Who would buy these? Isn't it riskier than, say, burying your cash in a mason jar in the back yard?
fixxer 11y ago
That would potentially do more harm than good. Crowding out private investment is bad and government contractors aren't exactly efficient. Government isn't going to boost the economy at this point, unless you're advocating WWIII.
- guelo 11y ago
  Investing in infrastructure is good beyond the Keynsian stimulus effect. If the return on the investment is greater than the 0% interest of borrowing the money than we come out ahead.
  - fixxer 11y ago
    Never in history have we dealt with this economic state at this scale. The notion that any theoretical outcome is a certainty is hilarious.
meric 11y ago
Free money != Free wealth. Every time the government consumes a $1 of free money, $1 of resources (wood, metal, machines, labor) becomes unavailable to the private sector, reducing consumption & investment opportunities. Just because the government can access free money doesn't mean the resources already there wouldn't have been invested or consumed. By spending that $1 of free money (sub-optimally as governments apt to do), it increases government spending portion of the GDP, but reduces the private consumption and private investment part of the GDP, and by removing private investment, it removes GDP growth that could be manufactured by the private sector for $1, for theoretically, eternity. Borrowing money to spend now for consumption equates to bringing forward future consumption and future investment to be consumed right now, and for losing future growth you get extra consumption today, like eating your seed corn. And by removing private investment, the economy doesn't grow, less labor is required to work the existing land & capital (due to technological progress), reducing % of the population in the labor force. As the U.S. government has been spending the free money it is generating from bond sales, and as a consequence consuming and investing resources and capital in a sub-optimal manner, you see what's exactly has been occurring, U.S. % of population in the labor force is dropping precipitously, corporations borrowing the free money for share buybacks instead of investing it (there are too few investment opportunities available because resources & capital is being soaked up by government spending). As a result the U.S. economy is anaemic enough the U.S. Fed isn't confident enough to raise rates by a mere 0.25%, 7 years after the 2008 financial crisis. “That’s why I often said that monetary policy was not a panacea — we needed Congress to do its part. After the crisis calmed, that help was not forthcoming. When the recovery predictably failed to lift all boats, the Fed often, I believe unfairly, took the criticism.” - Ben Bernanke http://www.ft.com/intl/cms/s/0/b1d44a48-6b71-11e5-8171-ba1968cf791a.html http://www.ft.com/intl/cms/s/0/b1d44a48-6b71-11e5-8171-ba196...
- irishcoffee 11y ago
  I normally wouldn't do this: this comment needs more visibility. The avg. person just doesn't know this.
- guelo 11y ago
  You're saying that the government should never invest in infrastructure. If it's ever a good idea to invest in our transportation, water, electric, etc. (not to mention R&D) then now that private money doesn't seem to have any good ideas is the time to do it.

The wasted opportunity of the government not investing this free money into the economy's infrastructure is infuriating.

by guelo 11y ago

The wasted opportunity of the government not investing this free money into the economy's infrastructure is infuriating.

AnimalMuppet 11y ago

This isn't free money. The interest is free. The principle still needs repayment. The government could in fact profitably invest a bunch of money in infrastructure. The problem is that the government invests, not where investment is needed, but instead where Congress politically decides to invest money. The results tend to be... sub-optimal. Is this a good opportunity for the government to invest in needed infrastructure? Yes, definitely. Is it a good opportunity for Congress to decide to spend a bunch more money? Not in my book.

saalweachter 11y ago
A 0% nominal interest rate combined with a positive inflation rate is a negative real interest rate. Money borrowed at a negative real rate isn't free, of course, but it is on sale. If we have a billion dollar project that needs to be done, you could save ~five million by spending the money today and paying for it three months from now.
- guelo 11y ago
  There's also the return on investment of the new infrastructure.
JoeAltmaier 11y ago
Who would buy these? Isn't it riskier than, say, burying your cash in a mason jar in the back yard?

fixxer 11y ago

That would potentially do more harm than good. Crowding out private investment is bad and government contractors aren't exactly efficient. Government isn't going to boost the economy at this point, unless you're advocating WWIII.

guelo 11y ago
Investing in infrastructure is good beyond the Keynsian stimulus effect. If the return on the investment is greater than the 0% interest of borrowing the money than we come out ahead.
- fixxer 11y ago
  Never in history have we dealt with this economic state at this scale. The notion that any theoretical outcome is a certainty is hilarious.

meric 11y ago

Free money != Free wealth. Every time the government consumes a $1 of free money, $1 of resources (wood, metal, machines, labor) becomes unavailable to the private sector, reducing consumption & investment opportunities. Just because the government can access free money doesn't mean the resources already there wouldn't have been invested or consumed. By spending that $1 of free money (sub-optimally as governments apt to do), it increases government spending portion of the GDP, but reduces the private consumption and private investment part of the GDP, and by removing private investment, it removes GDP growth that could be manufactured by the private sector for $1, for theoretically, eternity. Borrowing money to spend now for consumption equates to bringing forward future consumption and future investment to be consumed right now, and for losing future growth you get extra consumption today, like eating your seed corn. And by removing private investment, the economy doesn't grow, less labor is required to work the existing land & capital (due to technological progress), reducing % of the population in the labor force. As the U.S. government has been spending the free money it is generating from bond sales, and as a consequence consuming and investing resources and capital in a sub-optimal manner, you see what's exactly has been occurring, U.S. % of population in the labor force is dropping precipitously, corporations borrowing the free money for share buybacks instead of investing it (there are too few investment opportunities available because resources & capital is being soaked up by government spending). As a result the U.S. economy is anaemic enough the U.S. Fed isn't confident enough to raise rates by a mere 0.25%, 7 years after the 2008 financial crisis. “That’s why I often said that monetary policy was not a panacea — we needed Congress to do its part. After the crisis calmed, that help was not forthcoming. When the recovery predictably failed to lift all boats, the Fed often, I believe unfairly, took the criticism.” - Ben Bernanke http://www.ft.com/intl/cms/s/0/b1d44a48-6b71-11e5-8171-ba1968cf791a.html http://www.ft.com/intl/cms/s/0/b1d44a48-6b71-11e5-8171-ba196...

irishcoffee 11y ago
I normally wouldn't do this: this comment needs more visibility. The avg. person just doesn't know this.
guelo 11y ago
You're saying that the government should never invest in infrastructure. If it's ever a good idea to invest in our transportation, water, electric, etc. (not to mention R&D) then now that private money doesn't seem to have any good ideas is the time to do it.