LOANABLE FUNDS

Re “Liberal fiscal fantasies won’t fix economy” (Editorial, Nov. 13): According to C.D. Howe Institute president and CEO William Robson, the federal government’s borrowing squeezes the private investment needed to make the economy grow. However, this fallacy is based on “loanable funds theory,” which assumes only a fixed amount of funding exists. In the real world, bank credit expands and contracts during the business cycle, and new loans are made whenever banks deem a customer worthy. However, government deficits can impact commercial bank and corporate profits. If the government can’t run deficits, then it can’t spend money on roads, schools and other infrastructure to be operated on a low cost or non-profit basis. These assets would have to be privatized – and banks can

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