Washington Post columnist Ezra Klein, in a recent post, pointed out the world ‘desperately wants to lend us money,’ and argued we should invest that money in America.  Failing to do so, he said, is an ‘epic failure of fiscal management.’

The world financial markets are awash in cash looking for a place to go.  Sovereign nations, even those like Japan with huge debt levels, are able to borrow money up to 10 years out at negative real interest rates–that’s the nominal rate minus the inflation rate.  The same is true for the US, which can currently borrow money at the 10 year point at negative rates of interest–real rates that are almost -1.4%.  This is astonishing.  It’s never happened before.

So what’s going on?  The problem is the private economies, as opposed to  the public financial sphere, simply don’t want to invest right now.   Due to the shock of the Great Recession in the North Atlantic (US and Europe primarily), a shock caused by the over use of credit or leverage in the private sector, the private sector is paralyzed as households, banks and corporations all shore up their balance sheets at the same time.   No one wants to borrow.  There may be the intermittent investment, such as that which sustains the technology industry overall, but in terms of the global economy this by itself is insufficient to jar private investors away from safe havens, such as sovereign debt in big developed countries with their own currencies.

The thing is, properly applied credit creates economic growth.  So credit by itself isn’t a real problem.  It’s the use of credit where problems arise.  In the most recent example, particularly in the US but also in several European countries especially Spain, the credit flooded the property markets and built a bubble that burst.  It was a classic example of mal-investment on an epic scale.  And not for the first time in history.

So what to do now?  The credit hasn’t truly disappeared, it’s just that the private sector has no use for all the credit available.

The tonic is for governments to take advantage of this logjam (represented by those historically low interest rates) and to borrow and invest.  The simple fact is there’s trillions of dollars of work that can be done right now by governments.  Infrastructure expansion and modernization probably tops this list.  Many projects are already identified and doing them now would provide a substantive boost to employment.

Research and development should be high on the list too, in medicine, in biology, in technology and nano-technology, in energy sustainable and otherwise, in energy transmission systems and pipelines, in chemistry, in organic farming and foods, in pure science research everywhere.  Will all this investment be profitable?  No, but then it never is all profitable.

The message of all this cash sloshing around with nowhere else to go, is to open up pathways for it to be applied.  It would be nicer if the private economy could provide the pathways, but that’s simply not going to happen until the asset side of those balance sheets is repaired–a process that history shows conclusively can take many years without help.

So help should be provided.  There’s no lack of capital.  There’s no lack of work.  There’s no lack of labor available to get that work done.  Let’s get to it!