Wednesday, August 10, 2011

Lets Put The Investment Demand Curve in the Junk Pile

link here to article

The investment demand curve relates the cost of money to the expected return on an investment. It implies that an investment should be undertaken as long as the expected return exceeds the interest rate. The Table in this article shows that the real interest rate on US treasuries is negative, or close to zero, depending on the maturity of the bond. The decision to cut government borrowing means that the government is unable to make an investment that would yield a positive return. It also suggests that a government investment that makes use of idle workers at zero interest would be of no value to the economy or to the government.

No comments:

Post a Comment