Friday, January 4, 2019

Borrowing capacity is an asset that could end up having been consumed and squandered.

The capacity to borrow at a reasonable interest rates (or the seignorage when printing money) is a very valuable strategic sovereign asset. 

It should not be squandered away by the generation in turn only to benefit its members, or with some non-productive investments. 

When public borrowings are authorized, that should come with a clear recognition that a part of that borrowing capacity is being consumed, and with an indication of who (children or grandchildren born what year) are  expected to have to pay back that debt.

PS. Have we not already imposed a too large reverse mortgage on our economy?

PS. By assigning a zero-risk weight to Eurozone sovereign’s debts, even though none of these can print euros o their own, much of that capacity to borrow at a reasonable interest rates that could be so helpful with the outbreak of coronavirus has now been consumed?