In response to an FT article by Martin Wolf on 28th April 2015, entitled 'The British economy after the coalition'
"Why should one be desperate to avoid a free loan?"
There is no such thing as a free loan Mr Wolf, except in the delusional world of mainstream economics.
ZIRP and now NIRP are forms of financial repression that transfer wealth from savers to borrowers, from people to government, from poor to rich, and from capital intensive projects worthy of risk taking to financial engineering and zombie life support.
ZIRP and now NIRP exist because interest rates were kept too low by central bankers who haven't got the first clue about how the real economy functions, in order to blow asset bubbles that suit the agenda of idiot politicians, and to feather the nests of the bankers who feed off the free lunch delusion. They exist because governments can't afford to pay interest on the money they've already borrowed and don't even want to look at the mountains of promises and liabilities hidden off balance sheet.
Yes, let's invest in useful stuff, let's have a conversation about the scale of the debt burden we face...and indeed what we want from government whilst we're at it. Let's not sweep stuff under the carpet any more - that's how we got here. Debt was and is the problem and the cause - "the vulnerability of the UK’s financial sector to a global crisis" was and still is an effect. That's why regulation won't solve it - regulation does not solve moral hazard, the threat of going bust does. Free lunches do exactly the opposite.
Most people still have an innate sense that you don't get 'owt for nowt'. The economists who think that debt doesn't matter, that we are lending to ourselves, that all that matters is aggregate demand...are trying to build a better cart in the hope that it will to pull a reluctant horse. Horses pull carts, but not so much when they laden with excess baggage.