Despite the fact that the world is mired in debt, governments make borrowing costs tax-deductible, cheapening debt and encouraging borrowers to pile on more.Tax breaks for debt come in two principal forms.
Banks are charging higher interest rates and demanding more covenants on corporate loans, thus tightening credit for many borrowers at the same time the Federal Reserve tries to make borrowing less expensive.
Q: Will a downgrade make borrowing more expensive?
That could make borrowing more expensive for the government and add to its debt burden.
But Brazil's high interest rates of around 13% make borrowing costlier to service.
Deteriorating earnings in turn hurt companies' creditworthiness and make borrowing more expensive.
Such a ban, he said, would make borrowing more expensive, "with no commensurate benefit in reduced systemic risk".
In other words, banks gained extra security for their loans, allowing them to make borrowing less expensive.
For Wall Street financiers and for companies across America, it could eventually make borrowing easier and cheaper.
It also has amassed nearly $3 trillion in assets, including government debt and mortgage-backed securities, to make borrowing even cheaper for businesses and consumers.
The Fed has held short-term interest rates near zero since December 2008 to make borrowing cheap and ease the recovery from the financial crisis.
