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This would let central banks cut effective borrowing costs despite the zero bound on interest rates, since inflation reduces the burden of repaying a given loan.
The issue is not whether a given loan went bad, of course, but whether it was properly documented and underwritten by the standards that were promised.
The Basel II capital guidelines for banks, now being phased in around the world, even relied on the banks' own credit evaluations to decide how much capital they needed to back a given loan.
For example, the government, as a condition of bearing part or all of the cost of reducing the principal on a given loan, might have insisted on receiving some share of the future appreciation in the value of the property in question, perhaps by issuing a second mortgage that had to be paid off upon a sale.
As of late, loan structures and syndication have become so ridiculous that any number of minute stake holders could act as blockers against a logical move for both the majority of the lenders in a given loan and the developers themselves.
Shortly after the elections, rumours began to spread that all was not well with the Alberta and Great Waterways Railway (A&GWR), to which the government had given loan guarantees and on whose behalf it had sold bonds in the London bond market.
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Suggestions that vulnerable countries be given loans instead of grants were not politically acceptable.
Now the largest insurer of mortgages in the world, the Federal Housing Administration has given loans for over 34 million properties since its foundation in 1934.
Civil servants in some departments are given loans on generous terms.American officials depict the international campaign to ostracise Iran as successful coalition-building.
It will identify areas most suitable for rubber planting and persuade smallholders there to form co-operatives. Farmers will be given loans for replanting.
In October, Wonga was forced by the City watchdog to write off £220m of loans to 375,000 customers, who it admitted should never have been given loans.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com