That's the nominal rate of interest our federal government pays on 10 year loans from the public, a record low.
The demand for our nation's debt is increasing faster than supply. A lot faster. The world is literally begging us to issue more debt.
It seems to me we should oblige the market, issue more debt and spend it on wise things, and save deficit reduction packages for a day when we're not in
Just because we CAN borrow cheaply doesn't mean we SHOULD. It depends how the debt will be spent and the return on investment. I suspect many people who took out low interest education loans 10 years ago now wished they hadn't.
ReplyDeleteHow can we explain Irlands growth now after there austerity measures if more debt were the answer?
JL: I think returns on education, research and infrastructure (e.g., bridges that are nearly falling down) have proven returns that far exceed the nearly 0% real cost of long-term debt.
ReplyDeleteAnd that's not counting multiplier effects.
The basic math here is clear: austerity now is utter foolishness.
Please see:
ReplyDeletelaymen explanation:
http://economix.blogs.nytimes.com/2011/03/02/the-minimal-impact-of-the-stimulus/
A rigorous study:
http://www.economics.harvard.edu/faculty/barro/files/Barro%2BRedlick%2Bpaper%2B0210.pdf
Before talking about multipliers.
Also on a more applied reason why we should have austerity:
http://www.columbia.edu/~xs23/keynes/keynes1.htm
Ah, the delightful insights of Mr. Mulligan and Mr. Barro....
ReplyDeleteThey truly deserve to be called Professor Barro and Professor Mulligan.
ReplyDeleteProfessor Mulligan has made many contributions... The time elimination method has been used by countless economists....
Professor Barro's contributions don't even need to be stated. His work on multipliers is second to none. And his work on multipliers is probably some of his least important work.