Saturday, September 17, 2011

The Negative Real Interest Rate

Like M.Y., I've been baffled that this isn't a centerpiece of current discussion. It is currently so bloody cheap for the government to borrow that it seems crazy not to do it. It is, apparently, currently cheaper to fund projects by borrowing than by paying for them without borrowing. Even those who are averse to borrowing in general need to recognize that it is rational under certain conditions.

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