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But that involves lags and risks that buying an existing asset doesn't have.

Also, if you buy the existing asset on credit, the existing asset acts as collateral. If you borrow to build, there's no collateral until the thing is built.

Therefore, the banking sector has a bias against lending for capital formation and for lending towards asset bubbles.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 04:42:56 PM EST
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