Tornado Alley (PROG)

[StephanieVanbryce]

I would say maybe the Biggest resource we have right now that is that the US can Borrow Money DIRT CHEAP.

The U.S. government can borrow in nominal terms at about 0.5 percent for five years, 1.5 percent for 10 years, and 2.5 percent for 30 years. Rates are considerably lower in Germany, and still lower in Japan.

First, We have to decide what needs to be HELPED the MOST right now. I believe it's our Unemployment problem. I believe that, as I do not see how you can make any progress on paying down a deficit & debt ... without having revenues. We cannot run a business without income ..Our government can't either .. .and this is not to imply that gov. . should be run as a business, It shouldn't be run as a profit entity .. we don't want our government making a profit .. what would it be for? ... Well IF the gov. was making a profit off of us .. then they would AGAIN have to give us MORE tax BREAKS and I think most everyone agrees .. that we have 'tax breaked' our country ENOUGH for some time now...so that brings us back to Fixing the unemployment problem .. .AND the CHEAP cost of borrowing RIGHT NOW .. with the ability to LOCK IN the interest plenty of years out .. so Let's get people working again. The public sectors, both state and national AND regional have laid people off due to their budget problems since the 2008 financial crisis. Those people need to put back to work immediately everywhere ... and it is necessary, that would bring our unemployment rate down right there, Also, imo, the FEDS need to bail out the states somewhat, They ALWAYS have, except for now ... which is unwise. .. So then what does this accomplish, besides the obvious ? ... Well, people are working, they are back to buying stuff again .. eventually that works into the private sector hiring more .. SPENDING Increases DEMAND ... our business will supply it .. . ALSO these working people are back to paying taxes ... both to the state and the FEDS ... voila ... ;) .. we have a working economy again .... now NO, this isn't all but it's the START .. due to the FACT that we CAN BORROW money so CHEAPLY at this current time with a locked in rate for many years out .... The below short paper is pretty good, not posting all of it .. but you can go to the link... ;)

# # #

The U.S. government can borrow in nominal terms at about 0.5 percent for five years, 1.5 percent for 10 years, and 2.5 percent for 30 years. Rates are considerably lower in Germany, and still lower in Japan.

Even more remarkable are the interest rates on inflation-protected bonds. In real terms, the world is prepared to pay the U.S. more than 100 basis points to store its money for five years and more than 50 basis points for 10 years. Maturities would have to reach more than 20 years before the interest rates on indexed bonds become positive. Again, real rates are even lower in Germany and Japan. Remarkably, the UK borrowed money last week for 50 years at a real rate of 4 basis points.

These low rates on even long maturities mean that markets are offering the opportunity to lock in low long-term borrowing costs. In the U.S., for example, the government could commit to borrowing five-year money in five years at a nominal cost of about 2.5 percent and at a real cost very close to zero.

continuing down further...

So, what is to be done? Rather than focusing on lowering already epically low rates, governments that enjoy such low borrowing costs can improve their creditworthiness by borrowing more, not less, and investing in improving their future fiscal position even assuming no positive demand stimulus effects of a kind likely to materialize with negative real rates. They should accelerate any necessary maintenance project – issuing debt leaves the state richer not poorer, assuming that maintenance costs rise at or above the general inflation rate.

As my colleague Martin Feldstein has pointed out, this is a principle that applies to accelerating replacement cycles for military supplies. Similarly, government decisions to issue debt, and then buy space that is currently being leased, will improve the government’s financial position as long as the interest rate on debt is less than the ratio of rents to building values – a condition almost certain to be met in a world of sub-2% government borrowing rates.

These examples are the place to begin, because they involve what is in effect an arbitrage, whereby the government uses its credit to deliver essentially the same bundle of services at a lower cost. It would be amazing if there were not many public investment projects with certain equivalent real returns well above zero. Consider a $1 project that yielded even a permanent 4 cents a year in real terms increment to GDP by expanding the economy’s capacity or its ability to innovate. Depending on where it was undertaken, this project would yield at least an extra 1 cent a year in government revenue for each dollar spent. At any real interest rate below 1 percent, the project pays for itself even before taking into account any Keynesian effects.

This logic suggests that countries regarded as havens that can borrow long term at a very low cost should be rushing to take advantage of the opportunity. This is a view that should be shared by those most alarmed about looming debt crises, because the greater your concern about the ability to borrow in the future, the stronger the case for borrowing for the long term today.

There is, of course, still the question of whether more borrowing will increase anxiety about a government’s creditworthiness. It should not, as long as the proceeds of borrowing are used either to reduce future spending, or raise future incomes.

Any rational business leader would use a moment like this to term out its debt. Governments in the industrialized world should do so too.

Lawrence Summers - June 3, 2012
http://blogs.reuters.com/lawrencesummers/2012/06/03/breaking-the-negative-feedback-loop/

Now is the Time to SPEND not CUT. Europe and the Depression has proved that for us ... WE could take advantage of the knowledge that we have, but somehow in these times, education is scoffed at and to be ridiculed ... rather than admiring of AND most of ALL .. Learning from ........it's sad ... I'll still give you those links on the other other stuff .. I just thought it was important for us both to get in our minds what WE believe OUR number ONE Problem is AND what our Number ONE resource is the cost of borrowing, that was a DARN GOOD question .. ! ...... .NOT CANNED ! .. love and admire that so much !!!!!!!!!!!!!!!.. it makes you think !!! ... ;) such JOY! .. .. ;)