A few thoughts on the fact that r < 0, where r is the real rate of interest on long-term (< 30 years) debt for developed country governments
Situation predates pandemic and has happened despite central bank attempts to resist it, such as abandoned attempt by Fed to raise funds rate in 2019.
Extends to corporate bonds as well. Lowest investment grade BBB currently offering 2.38 which implies expected real return (net of inflation and expected loss from default) also below zero. Was 5-6 per cent before GFC fred.stlouisfed.org/series/BAMLC0A…
Same for publicly traded stocks on plausible estimates of future earnings crookedtimber.org/2020/08/12/wha…
Implies r < g (nominal growth rate), contra Picketty. *But* corporate profits are high and (ultra) rich are getting (ultra) richer. Presumably profits are being creamed off as rents in some way. Brett Christopher's forthcoming Rentier Capitalism is highly relevant
If r < 0, any public investment that generates sufficient income to cover costs improves public finances. If we take r as social discount rate, scope for socially beneficial increased public investment is vast.
Implied policy: nationalise sources of rent: IP, monopoly platforms, financial sector etc
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