Login
or
Register
Home
»
Trains Magazine
»
Forums
»
General Discussion
»
Transportation Infrastructure - Who Will Finance Rail?
Edit post
Edit your reply below.
Post Body
Enter your post below.
<P mce_keep="true">[quote user="jeaton"] <P>[quote user="Bucyrus"] <P>[quote user="The Butler"] <P>[quote user="Bucyrus"]</P><BR> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT face="Times New Roman" size=3>But if there is a real need for an improvement then investors will finance it and the improvement will get done.<SPAN> </SPAN>So by definition, if it does not get done, there was no need for it.<SPAN> </SPAN></FONT></P> <P>[/quote] </P> <P> <FONT face=verdana,geneva>That seem a little simplistic to me. I might be wrong, but doesn't the length of return play a major role on whether investors finance or not? It seems to me, we are in a day of "<I>instant returns."</I> If it takes more than a year or two to show desired returns, investors are not interested. There for, it puts the second sentence into question.</FONT><BR> </P> <P>[/quote]</P> <P class=MsoNormal style="MARGIN: 0in 0.5in 0pt"><FONT face="Times New Roman" size=3>Well I am putting it in a rather simplistic way to make a clean point.<SPAN style="mso-spacerun: yes"> </SPAN>We live in a tangle of real needs, agenda driven needs, public and private financing.<SPAN style="mso-spacerun: yes"> </SPAN>And it is true that if the return is too long-term, it will discourage private investment.<SPAN style="mso-spacerun: yes"> </SPAN>But if the return is too low, that will likewise discourage investment.<SPAN style="mso-spacerun: yes"> </SPAN>Add to that the fact that somebody can easily make a case for need, and you have needs going unfunded. </FONT><SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA">So there is a threshold at which a need is great enough to attract private investment.<SPAN style="mso-spacerun: yes"> </SPAN>But if a need is not great enough to meet that threshold, I think that is excellent criteria for ruling out pubic financing of it.<SPAN style="mso-spacerun: yes"> </SPAN>And even if a need registers above that threshold, I think that in most cases public financing would be worse than no financing.<SPAN style="mso-spacerun: yes"> </SPAN>Every time we publicly finance the fulfillment of a need, the government grows bigger and better equipped to dredge up more <I>needs</I>.<SPAN style="mso-spacerun: yes"> </SPAN></SPAN></P> <P>[/quote]</P> <P>The premise that if there is a real need, then private financing will fulfill the need is faulty because it assumes that there are unlimited private funds. That is simply not the case. Suppose there is a need for something but the activity to produce that something is only going to pay a return of say 1%. Do you think that there is any chance that such an activity is going to attract investors? </P> <P>Consider the DM&E's proposal to build into the Powder River. It was believed that the added competition for hauling that coal would reduce the delivered cost of coal to a number of utilities in turn benefiting the utility customers. Unless they were totally brain dead, you would have to think that the folks had developed plan to make a profit on the business, but it seems obvious that there wasn't <STRONG>enough </STRONG>profit in the plan to attract private investment. </P> <P>If your criteria for the establishment of a business activity is that it must only start if it can obtain funds from private investment sources, then you should expect to be doing without a lot of needs. By that standard, there would not be an Interstate Highway System. Did we need that for sure? Perhaps not, but I can give you this persoanl anecdote. In 1958 my father drove me from our home in Northern Wisconsin to Chicago to begin my college work. The trip on the standard two lane highways of the day took almost twelve hours. Ten years later, I could make the same trip in half the time. Now I didn't <STRONG>need </STRONG>to make the trip in half the time, because I couldn't say I would be able to put the time I saved to productive use. On the other hand, I can assure that the trucker, the person traveling for business purposes or the repair man on his way to a location did and does make productive use of the time saved. All that means is a reduction reduction of the cost for doing business-cost savings that ultimately make it to the consumer.</P> <P>I hate to break it to you, but your belief that government funtionally cannot make productive investments is an ideology that does not hold up to careful scrutiny. The wealthiest countries in the world have all made heavy use of public funds to develope their economies, most with a far greater proportion of their Gross Domestic Product than we spend in the US. Those that haven't or won't find themselves in the second or third tier in the wealth lineup. </P> <P>By the way, just because that an activity is funded by private investment doesn't mean that the consumer of the product doesn't pay for that investment. The investor expect a payment of interest or dividends for providing the funds, in turn the company that borrows the funds expects to collect enough in the proceeds from the sales of their product and will price accordingly. Who then pays?</P> <P>[/quote]</P> <P class=MsoNormal style="MARGIN: 0in 0.5in 0pt"><FONT face="Times New Roman" size=3>If there is a need for something that only will return 1% to investors, then it must not be much of a need.<SPAN style="mso-spacerun: yes"> </SPAN>If it were a big need, it would return more on the investment.<SPAN style="mso-spacerun: yes"> </SPAN>That is the way the free market sorts out what is worth doing and what is not.<SPAN style="mso-spacerun: yes"> </SPAN>I agree that there are not an infinite amount of private funds.<SPAN style="mso-spacerun: yes"> </SPAN>But the same is true of public funds.<SPAN style="mso-spacerun: yes"> </SPAN>But fundamentally, there are more private funds than public funds available because public funds are reduced by administration costs of the government, and furthermore, <U>all</U> public funds are available as private funds.</FONT></P> <P class=MsoNormal style="MARGIN: 0in 0.5in 0pt" mce_keep="true"> </P> <P class=MsoNormal style="MARGIN: 0in 0.5in 0pt"><SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA">With regard to needs, I think the one with the need should pay for it.<SPAN style="mso-spacerun: yes"> </SPAN>But the term,<I> need, </I>as a noun, seems to be a recently created term of empowerment with the implied definition that somebody else should pay for it.<SPAN style="mso-spacerun: yes"> </SPAN></SPAN></P>
Tags (Optional)
Tags are keywords that get attached to your post. They are used to categorize your submission and make it easier to search for. To add tags to your post type a tag into the box below and click the "Add Tag" button.
Add Tag
Update Reply
Join our Community!
Our community is
FREE
to join. To participate you must either login or register for an account.
Login »
Register »
Search the Community
Newsletter Sign-Up
By signing up you may also receive occasional reader surveys and special offers from Trains magazine.Please view our
privacy policy
More great sites from Kalmbach Media
Terms Of Use
|
Privacy Policy
|
Copyright Policy