Wednesday, April 25, 2012
Higher borrowing costs
As the government takes on actual debt (credit expansion as opposed to future liabilities) to the extent this is inflationary the only way the government can maintain low borrowing costs is to pass on artificially higher rates to the private sector individual. This blocks profitable investments that could have been made otherwise, as all borrowing suddenly becomes effectively taxed through the interest rate. IMO, the Tories will never attempt to reduce state borrowing because to do so immediately gives NL the opportunity for electoral bribing i.e. if NL will always borrow to the max then the Tories cannot succeed at the ballot with a debt reduction strategy. So all looks rather sedate for the UK going forward. On the plus side I read that Alberta is legally mandating a balanced budget.