You shift the demand curve, but not the supply curve, so now more money is chasing the same asset, so buyers pay more and sellers benefit. Same as student loans.
You also increase money supply when taxpayers “eat” the loss for defaulted loans, lowering the purchasing price of the currency in general.
Finally, the decision makers can overshoot or undershoot how much to move the demand curves, resulting in a misallocation of society’s resources. Again, see student loans and even home loans.
>Only if you subsidize it below the expected value of return.
I do not see how anyone could know this, since it requires predicting economic conditions 30 years in the future. The government is guessing just as much as a non taxpayer funded lender would, except the government does not have to worry about running out of cash.
You shift the demand curve, but not the supply curve, so now more money is chasing the same asset, so buyers pay more and sellers benefit. Same as student loans.
You also increase money supply when taxpayers “eat” the loss for defaulted loans, lowering the purchasing price of the currency in general.
Finally, the decision makers can overshoot or undershoot how much to move the demand curves, resulting in a misallocation of society’s resources. Again, see student loans and even home loans.