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Golden Opportunity to Update Infrastructure Will Soon Be Gone

Posted By Barry Ritholtz On July 14, 2013 @ 11:00 am In Fixed Income/Interest Rates,Taxes and Policy | Comments Disabled

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My Sunday Washington Post Business Section column is out. This morning, we revisit our October 2011 discussion [2] about infrastructure repair.

The present conversation is about the once in a lifetime opportunity to finance these works at historically low interest rates, which are now starting to rise.

Here’s an excerpt from the column:

“Thanks to the Federal Reserve’s zero interest rates and quantitative easing policies, borrowing costs are near generational lows. The costs of funding the repair and renovation of America’s decaying infrastructure are as cheap as they have been since World War II.

But the era of cheap credit may be nearing its end. And thanks to a dysfunctional Washington, D.C., we are on the verge of missing a once-in-a-lifetime opportunity.”

The thinking here is that all of these things will eventually occur — bridges are falling like dominoes — so we might as well do it when the costs are cheaper rather than expensive.

“The United States once enjoyed what venture capitalists like to call “first mover advantage.” We innovated in these areas and were often the first to deploy these infrastructures and technologies. By virtue of being first, our systems tend to be older and in greater need of repair than in most of the world. Not bringing them up to date leaves us at an economic disadvantage vs. the rest of the world.

We do not want to miss the historic opportunity to finance projects at unusually inexpensive rates. Indeed, dysfunction in D.C. has already impacted state and municipal financing vehicles like the Build America Bonds. Sequestration has eliminated most of their special tax credits, and their usage as a financing vehicle has slowed significantly. It is not surprising that the public works projects that these were funding have fallen off dramatically.”

We are fools if we let this opportunity slip by . . .

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Source:
Rising interest rates could mean the window to fix infrastructure on the cheap is closing [3]
By Barry Ritholtz
Washington Post July 12 2013  
http://www.washingtonpost.com/business/fix-infrastructure-on-the-cheap-while-you-still-can/2013/07/11/ac0595c8-e51c-11e2-a11e-c2ea876a8f30_story.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2013/07/golden-opportunity-to-update-infrastructure-will-soon-be-gone/

URLs in this post:

[1] Image: http://www.washingtonpost.com/barry-ritholtz/2011/03/31/AFWBwIBC_viewAll.html

[2] discussion: http://www.washingtonpost.com/business/repairing-infrastructure-can-help-repair-economy/2011/10/17/gIQADkui6L_story_1.html

[3] Rising interest rates could mean the window to fix infrastructure on the cheap is closing: http://www.washingtonpost.com/business/fix-infrastructure-on-the-cheap-while-you-still-can/2013/07/11/ac0595c8-e51c-11e2-a11e-c2ea876a8f30_story.html

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