Australian Lefty on Politics, Governance, Science and Info Management

I’ll pay you to take my money

Posted by Dave Bath on 2008-10-01

On The Economist current indicators page (print edition 2008-09-27 p 105) is a report of the theoretically impossible:

Investors moved again into safe havens such as US Treasury bills, sending one-month rates below zero at one point during the day.

This is like me saying to you "Here is a $100.  Give me back $99 in a month and I’ll call it square."

While money-market rates soar, credit between banks and to industry is tight, the politicians are bleating about unavailable credit, investors are so keen to loan money to governments they are prepared to lose a few points on the deal, charging negative interest on a currency that is slumping.

So, the money is there for governments to borrow, even those with a massive deficit, while business considers business to risky to deal with.

Now is the time for governments to borrow funds for infrastructure projects directly, rather than through PPPs with businesses that borrow at much larger rates.  A Keynesian/New-Deal trickle-up economic stimulus package seems almost a no-brainer, especially for a country like Australia where a new (Rudd) government blasted the previous (Howard) one for running down infrastructure.

If the hollowmen in Canberra aren’t putting together a list of public works to bolster economic activity, using the cheap funds available to governments, then we are facing a lost opportunity to stay afloat.

Hell, there’s no better to buy back the farm… Telstra, CommBank, …

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2 Responses to “I’ll pay you to take my money”

  1. A H said

    Governments don’t know how to look after infrastructure. It’s better if private investment pays for infrastructure because then they have an incentive to make sure the infrastructure is used and looked after properly. . The funding might be more expensive if done privately but on the other side the cost governmnet mismanagement more than makes up for it.

  2. Dave Bath said

    If AH is correct, then the same argument should apply to military services…. oh…. that’s what’s been happening with the use by the US mil of contractors rather than military personnel.

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