Otherwise, the absurd positive feedback loop will continue: consumer debt, subsidized Chinese imports, American job loss and factory closures, the growing U.S. current account deficit, burgeoning Chinese currency reserves reinvested in American debt..
Aside from their fixation with return on equity, bankers hate high equity requirements and love to fund by borrowing because debt is subsidized through an ever-increasing, underpriced "safety net" from various government guarantees.
To be precise, a transfer of wealth and opportunity is being made from lower- and middle-class families to upper-class families, and to add insult to injury, the non-wealthy students are being forced to take on a lifetime of debt to subsidize the aid for the wealthiest students.
Contrast this risk-sensitive response with the pre-crisis period, when euro-area prudential policymakers repressed market discipline (and depressed risk premia) by treating all sovereign euro-area debt as risk free, thereby subsidizing unsustainable debt accumulation.
Subsidizing debt seems harmless simply because we've always done it.
Critics say it distorts economic activity by subsidizing debt financing, encouraging dangerously high amounts of leverage.
Since high leverage increases systemic risk, subsidizing debt funding and leverage is paradoxical and distortive.
Subsidizing corporate debt is just too risky.
"The Case Against Subsidizing Housing Debt," Project Syndicate, May 29.
Don't be silly: payroll tax receipts are being used neither to acquire assets nor to pay down federal debt; instead, they are subsidizing deficits in the rest of the government.
