http://www.economist.com/news/finance-and-economics/21599394-world-needs-more-infrastructure-how-will-it-pay-it-long-and-winding
The world needs more infrastructure now more then it ever did but the ability to pay for it is becoming harder and harder. Investments in infrastructure are vital to our economy and yet financing Infrastructure is falling out of favor with the banks. European lenders who used to invest in infrastructure are now steering away from them. The only banks willing to invest anymore are the Japanese banks which have stronger balance sheets and willing to put money to work.
Banks are not only less willing to give out long term loans they are less willing to take on as much risk as they previously could. Before they would take on about 90% of the construction cost now they are only taking on about 70% causing the builders to come up with more money slowing the whole process down.
It is said to cost about 57 trillion dollars to build and maintain the world's roads, power plants and pipelines between now and 2030. Infrastructure spending right now is currently at 2.7 trillion a year when really 3.7 trillion is needed. This is creating a need and opportunity for new investors willing to take on long term loans in infrastructure.
While this article looks at infrastructure spending as a burden, I see it as an opportunity for economic growth in the United States. If the United States encouraged private investment into infrastructure with things like tax breaks for companies to invest more, then this could encourage economic growth. It would increase private spending, and more people would have to be employed to improve our infrastructure. Furthermore, this would be a great long-term investment, because better infrastructure would make it easier for companies to transport goods. This will encourage more investment long-term.
ReplyDelete"Unglamorous as they may be, such investments are vital for economic growth. Yet financing infrastructure is falling out of favour with banks. Can other investors plug the gap?"
ReplyDeleteI think this quote really sums up this article. Hopefully, as we have discussed in class, we can look towards the futures and recognize this additional infrastructure is an opportunity for growth and a chance that we need to optimize.