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Posts Tagged ‘Debt’

Education and Student Debt

Posted by Steve Markowitz on August 26, 2016

Marshall McLuhan“The reason universities are so full of knowledge is that the students come in with so much and leave with so little.”  Marshall McLuhan

 

Republicans and Democrats attempt to differentiate themselves via their views of the government’s role in the economy.  With close examination, it is hard to find real differences between them.

Those on the Right promote the benefits of “true” capitalism that allows markets to set prices via supply and demand.  Those on the Left share the view that capitalism is too harsh and that the government needs to step in and smooth out inequities created by markets.  At the extreme Left, socialism is promoted, irrespective of its history of failure.

At the macro-economic level there is little difference between Republicans and Democrats.  Crony capitalism is rampant within both parties.  Republicans typically support large industries and those in the military industrial complex.  Democrats promote social programs that benefit industries including education, social services, medical services, and trial lawyers.  The result of crony capitalism has been a significant increase in governmental spending and a surging United States’ debt over the past 50 years.  This debt is in part responsible for the economic malaise that has been inflicted on the country over the past decade.

An example of crony capitalism and the damage it has done is the educational industry.  Through the US Department of Education, as well as at the state and municipal levels, the funds spent on primary education have been skyrocketing as indicated by the charts below.

Total Educational Spending

Spending Per StudentSat Scores

 

 

 

 

However, the increased spending has not resulted in improved education.  The chart shows how poorly our students are doing in basic reading comprehension.

Student DebtThe problem is more significant at the college level.  The educational industry, with support of the US government and its loan programs, has created the false narrative that all Americans require and deserve a college education, irrespective of whether or not it improves their economic well-being.  As a result, the amount of student debt now exceeds $1 trillion and a significant portion of college graduates cannot make an income level that would allow them to pay off the debt in a reasonable period of time.  Many have been forced to move back into their parents’ houses.

While a market-based economy can be a cruel arbitrator of scarce resources, crony capitalism has proven to be catastrophic to those who have been cajoled into inappropriate economic decisions based on government programs.  It is a major cause of the growing wealth disparity between the ultra-rich and average Americans.

Yes, both Hillary Clinton and Donald Trump have prospered under crony capitalism.  The same cannot be said for most Americans.

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Brexit Consequences to Come

Posted by Steve Markowitz on July 2, 2016

The political elites and many in the economic community warned of dire consequences should Britain vote to leave the European Union.  Immediately following the announcement of the vote equity markets worldwide drop significantly.  However, one week later they have rebounded and are about back to where they started.

The action of the equities markets suggest either the predicted dire consequences were severely exaggerated, or as an alternative, equity markets with the assistance of continuous central banker interventions no longer believe that stock valuations can go down.  Neither is very comforting.

How the UK’s exit from the EU will affect the world economy remains to be seen.  The Daily Reckoning suggests that political elite Progressives will take a play out of Obama associate Rahm Emanuel strategy book, who infamously said: “You never want a serious crisis to go to waste.”  Using this strategy, they will use the Brexit vote as an excuse for more central bank spending and interventions into the economy.  Why not, that strategy has failed for the last eight years so let’s double up on it.

The Daily Reckoning reports that since 2009 central banks have printed over $12 trillion.  In addition, they have made 654 interest cuts worldwide.  This has succeeded in creating equity bottles that have made the wealthy wealthier.

The Daily Reckoning expects more Quantitative Easing, QE 4, and an even more radical policy called “helicopter money” where the Fed basically froze money to the masses.  These radical steps are not taken out of stupidity.  Instead, they are an acknowledgment by central banks that we are reaching the end game.  Without continuous and more aggressive interventions, the rebalancing of the economy will begin and it will be painful.  Irrespective of the central banks’ actions, that rebalancing will occur.  It is only a matter of time.

Posted in economics | Tagged: , , , , | 1 Comment »

Posted by Steve Markowitz on October 21, 2015

Macro-Economic Consequences of Excessive Debt

During the past three and half decades the United States and other countries have been on a debt binge.  At an increasing rate the Country has used debt not to finance needed infrastructure or future growth, but instead to increase the lifestyle and wealth of the current generation, most notably Baby Boomers.  Examples include the United States running significant deficits to fund its social programs and crony capitalism.

DebtIn the private sector, individuals and corporations now use a similar philosophy for debt.  Instead of using debt in the traditional role of financing growth, companies use it to increase distribution to executives, employees and shareholders.  Similarly, individuals who in previous generations used debt mainly to fund the purchase homes, vehicles and other big-ticket necessities, now use it to purchase any product that offers instant gratification.  Debt is also used, with governmental support, to fund higher education that no longer offers income growth.  The significant increase in worldwide debt is depicted in the chart.

Although politically incorrect to state in today’s world, excessive debt has consequences.  On the consumer side it often leads to bankruptcies and loss of assets.  A more insidious problem occurs when debt is sovereign, the consequences that we are now seeing in the lethargic economic growth that is occurred since the end of the recession nearly 6 years ago.

Dr. Lacy H. Hunt, Ph.D has published a lengthy report on issues created by excessive debt in the Hoisington Quarterly Review and Outlook – 3Q2015.  This report advises investors to stay in long-term government bonds given the likelihood of long-term \ continued low interest rates.  The report also includes reasons why the debt has been, and will continue to be, a drag on economic growth.  Hunt’s conclusions include:

  • Future business activity will reflect two economic realities: 1) the over-indebted state of the U.S. economy and the world; and 2) the inability of the Federal Reserve to initiate policies to promote growth in this environment.” Translation – The Fed’s easy money policies have not and will not fix the economic problems brought on by excessive debt.
  • S. government debt now stands at 103% of GDP. If private debt is included, the ratio climbs to about 370% of GDP.  Scholarly studies indicate that real per capita GDP growth should slow by about one-quarter to one-third from the long-run trend when the total debt-to-GDP ratio rises into the range between 250% and 275%.  Since surpassing this level in the late 1990s, real per capita GDP has grown just 1% per annum, much less than the 1.9% pace from 1790 to 1999.”  Translation – Excessive debt has led to lower economic growth.
  • These results indicate that the relationship between debt and economic growth is non-linear, or progressively negative, as debt advances to higher levels, a pattern confirmed by academic research (Chart 2). The latest information further supports this relationship.  The current expansion began in 2009, and since then real per capita GDP growth has been 1.3%, less than half the 2.7% average growth in all expansions from 1790 to 1999.”  Translation – This recovery is different and historically weak and seems related to the growing debt.
  • The Bank of International Settlements released a report last month stating that total public and private debt relative to GDP for the entire global economy stands at 265%, up from 219% at the peak of the prior credit cycle. Additionally, the global rate of growth is decelerating significantly while debt levels are continuing to rise, indicating an increasing debt drag. Researcher Chris Martenson calculated that since 2008 total public and private debt rose by $60 trillion while GDP gained only $12 trillion.”  Translation – While the huge deficit spending by governments have not led to proportional economic improvement.
  • Despite the unprecedented increase in the Federal Reserve’s balance sheet, growth in M2 over the first nine months of this year fell below its average rate of growth over the past 115 years, a time when the growth in the monetary base was stable and quite modest (Chart 3).” ….  “The drop in velocity to a six decade low is consistent with a misallocation of capital and an increase in debt used for either unproductive or counterproductive purposes.”  Translation – While the Fed has increased its balance sheet significantly, it has not led to a real increase in the money supply, a requirement for economic growth.
  • The current zero interest rate policy has rendered mass distortions in the allocation of capital and mispricing of risk assets. Such repressed interest rates have contributed to more excess capacity that, in turn, has reduced inflation.  The ZIRP policy allows low quality borrowers access to debt markets, creating untenable balance sheet exposure when economic activity slows”  Translation – The fed’s policies are leading to imbalances in the markets that will ultimate have to rebalance, which always involves pain.
  • An extended period of negative interest rates would lead to many adverse unintended consequences just as with QE and ZIRP. The initial and knockoff effects of negative interest rates would impair bank earnings.  Income to households and small businesses that hold the vast majority of their assets with these institutions would also be reduced.  As time passed a substantial disintermediation of funds from the depository institutions and the money market mutual funds into currency would arise.  The insurance companies would also be severely challenged, although not as quickly.  Liabilities of pension funds would soar, causing them to be vastly underfunded.”  Translation – The coming consequences of the Fed’s policies will not be pretty.

Lacy concludes by saying: “History, economic studies and practicality of politics suggest this is just another red herring trying to solve over-indebtedness with more debt.”  In normal times the obviousness of this conclusion would be laughed at.   But these are not normal times for the world’s economies.

Hoisington Quarterly Review and Outlook – 3Q2015

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Government Pursues Bad Mortgage Policies with Veterans

Posted by Steve Markowitz on July 17, 2015

Various policies and practices led to the 2008 financial meltdown that nearly took down the world’s economic order.  Many were related to the inappropriate use of debt.

Beginning in the mid-1990s, the Federal Reserve began aggressively using low interest rate policies to offset economic downturns.  This included the Asian markets’ turmoil in the late 1990s, the Datacom and Dot com busts, as well as the economic downturn caused by 9/11.  While these low interest rate policies offered short-term benefits, in the long term they created significantly damage to the economy.

Downturns are a necessary part of economic cycles.  They are often caused when supply and demand of goods and/or services go out of balance.  During downturns excess goods and services are sold off and depressed prices, which ultimately leads to rebalancing supply and demand and then economic growth as more goods and services are required.

The low interest rate Fed policies, along with governmental bailouts, led to huge imbalances including the housing bubble.  With historically low interest rates and lax lending practices, housing prices appreciated on an unsustainable path.  Then, when appreciation turned to depreciation, millions could no longer pay their mortgages leading to the collapse of 2008.

Under typical conditions an economic calamity as encountered in 2008 suffices to “teach” a generation to avoid unsound economic practices.  However, these are not normal times. After 2008 Federal Reserve and central banks doubled down on the low interest rate policies.  While they tempered the effect of the meltdown in the short term, there are responsible for the lackluster recovery, the slowest since the Great Depression.

Pied PiperThe American government often uses interest rate policies to implement social manipulation pursued by Progressives.  The 2008 housing bubble was fed by the government promoting mortgages to income brackets that could not afford to make the monthly payments.  Millions then lost their homes and any equity in them. They would have then better served not purchasing the houses in the first place, but were cajoled into doing so by governmental intervention.  However, even this lesson has not been learned.

Once again the government is promoting imprudent mortgage policies, this time to veterans.  The company NewDay USA promotes as a benefit in one of the headings on its website newdayusa.com states: We’re a Different Kind of Lender.  As a Veteran, You Can Borrow Up to 100% of the Value of Your Home, Not Just 80%.”  NewDay USA goes on to say: ”With up to 100% of your home’s value available, including mortgage balance, you could qualify for thousands of dollars more from NewDay USA.”

NewDay USA could not make this offer without the backing and support of the US government.  This crony capitalism not only benefits the stakeholders at NewDay USA, but also places at risk their customers, veterans who served their country.  It is imprudent for any homeowner to not have at least 20% equity in their home.  This equity cushion not only helps ensure that their mortgage payments will be set at a reasonable level given their income, but it will make it more likely that their homes’ value will remain above the market price during inevitable downturns.

Some politicians back imprudent policies with good intentions, but little understanding of economics; the fools.  Others promote such policies for less benign reasons including crony capitalism; the greedy.  Neither serve the country well.

New Day

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Greek Banks Close for a Week as Crisis Grows

Posted by Steve Markowitz on June 29, 2015

The Wall Street Journal reported that Greece has ordered that its banks remain closed for the next week to the stem panicked cash withdrawals by depositors.  This drastic move indicates that the five year long Greek debt crisis is coming to an end game.

After the financial meltdown occurred in 2008, the economic folly of Europe’s single currency, the Euro, became apparent.  The European Union was created in an effort by Europeans to create a political climate that would lessen the likelihood of future wars on their continent.  This desire was a reaction to the carnage that inflicted on Europe during two world wars in the 20th century.  While the political idea was noble, little thought was given to the economic consequences that a central currency would lead to.  Those consequences are now playing out.

The Euro was destined to create an economic calamity because the political union was not accompanied by a truly economic union.  European countries maintain their own banking systems and Euro central bank was weak.

After the European Union and the Euro were created, the more efficient and stronger economies of North Europe, specifically Germany, obtained the lion share of benefit created by the Union. With nearly all European countries having a single currency, less efficient countries had their cost of labor increased in relation to more efficient ones.  As a result, the poorer countries had a artificially strong currency that enabled them to consume increased amounts of the more efficient countries’, i.e. Germany.  Through the Euro, Greece had to access to relatively cheap borrowing via an overall European credit rating that did not reflect the realities of individual countries.  As a result, Greece and other Southern European countries borrowed more funds than they could afford to pay back and use these funds to purchase imports from Germany and other exporting countries.

When the recession hit, Greece and other countries were unable to make payment on their debt.  This led to a battle between the creditor countries such as Germany and debtors like Greece.

For five years the Greece debt crisis has been a can kicked down the road.  Creditors including, Germany, have been unwilling to forgive Greece’s debt, even though Greece is not a position to repay it.  Had Greece continued to have its own currency, it would have devalued versus the German currency making its exports cheaper and more likely that it would have been able pay back its debt obligations.  The single currency has curtailed this natural rebalancing mechanism of sovereign debt.

Greece has been operating under an austerity program for some years in an effort to pay down its debt obligations.  That effort was doomed to fail since austerity does not address Greece’s uncompetitive position.  Its current efforts to stop the panicked withdrawals At the Greek banks will also fail since this radical step will only create more panic in Greece and other southern European countries.

It is difficult to determine how the next few days will play out with the Greek crisis.  There are basically two long-term solutions 1) Greece drops out of the European Union and reverts back to its own currency, while at the same time defaulting on its debt, or 2) Greece’s creditors, mainly Germany, writes off the loans.  Either scenario has very painful economic consequences.  Either would require a realignment of the Euro and the European Union to correct the economic deficiencies of this unnatural union.

Greece is a relatively small economy.  Had it not been for the Euro, its default would have had only minor consequences for the world economy.  However, similar to international banks that were allowed to become too big to fail, the European Union’s single currency has made the consequences of even smaller economies European countries defaulting too big to fail.

Given the hard choices for Europe, look for the politicians and bankers to do whatever is possible to kick the can down the road.  This means that it is likely they will give Greece more loans to continue the illusion that the country is not defaulting on its loan obligations.  However, that bit of alchemy would only push the crisis off for a short period of time.

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China’s Growing Debt

Posted by Steve Markowitz on March 31, 2015

This Blog has often referred to the real and potential problems associated with the growing debt in the United States and Western Europe.  However, the unsustainable growth of debt is a worldwide phenomenon that includes the fastest-growing major economy, China.

The Wall Street Journal reported on China’s growing debt.  According to the International Monetary Fund, China’s debt is growing quicker than that of Japan, who has a debt to GDP ratio of over 200%.  It is also growing faster than the debt of the United States and South Korea.

A significant portion of China’s debt is being created by local governments who borrow to finance projects in their areas.  The Journal reports that these local governments have accounted for 25% of China’s total debt since 2008 and in 2013 reached 36% of GDP, double the rate of five years earlier.  At this rate it is estimated that local borrowing will increase to 52% of GDP by 2019.

Incredibly, there are approximately 8,000 local quasi-government finance organizations throughout China.  This huge number and the large amount of debt lend themselves towards corruption and inefficient usage of the debt.  Also, since these finance organizations are related to the government, they are able to sell bonds with high risk at subsidize rates as lenders incorrectly believe that default is not possible.

This lose money policy in China lends itself to financing ventures that do not make economic sense, thereby increasing the likelihood of defaults.  This is eerily reminiscent of the lose money policies of the West and the United States in particular that led to the economic meltdown of 2008.  It is likely that China’s flawed financing practices will lead to similar results in that country.  Given the size of the Chinese economy, that will lead to contagion in economies worldwide.

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Debt, Conflict and the European Dilemma

Posted by Steve Markowitz on January 28, 2015

Europe has is encountering another canary the mine. The Greeks have voted in a radical Leftist party called Syriza. They won as an opposition to the so-called austerity measures placed on Greece since the 2008 economic meltdown that resulted in it not being able to pay its debt.

The 2008 economic calamity was initially caused by a meltdown in the US mortgage markets. Thhis crisis was not by happenstance or caused by normal market forces. It was inflicted on financial markets worldwide as a result of broad-reaching governmental interventions in the economy. This included bailouts of equity markets and industries when the markets attempted to rebalance supply and demand through normal recessionary action. In addition, central banks, particularly the US Federal Reserve, intervened with artificially low interest rates, again in efforts to forestall the normal corrective market actions through recessions.

As a result of the intervention, not only has the recovery been the weakest since the Great Depression, but at the same time the financial imbalances have not been corrected. Instead, they (the debt) have been moved from the private sector to sovereign debt. The most recent economic manifestations that have now become systemic include the significant turmoil in currency markets. However, a potentially more serious issue has surfaced on the geopolitical front, especially in Europe, where the euro and European Union itself is in jeopardy.

George Friedman of Stratfor.com has published an article titled The New Drivers of Europe’s Geopolitics that offers insight into the current building crisis within Europe that is posted in full below. Friedman’s concludes that “I am focusing on fragmentation partly because it is happening before our eyes” referring to the fragmentation of the European Union. In addition, “The coalition of the Radical Left party, known as Syriza, has scored a major victory in Greece.  ….  It is drawing along other left-wing and right-wing parties that are united only in their resistance to the EU’s insistence that austerity is the solution to the ongoing economic crisis that began in 2008.”

Friedman discusses two views within Europe as why the financial crisis of 2008 continues in the EU.

  1. The German version, and the one that became the conventional view in Europe, is that the sovereign debt crisis is the result of irresponsible social policies in Greece, the country with the greatest debt problem. These troublesome policies included early retirement for government workers, excessive unemployment benefits and so on. Politicians had bought votes by squandering resources on social programs the country couldn’t afford, did not rigorously collect taxes and failed to promote hard work and industriousnes
  1. The other version that is beginning to gain traction, especially in the poorer European countries is: “The loans German banks made to countries such as Greece after 2009 were designed to maintain demand for its exports. The Germans knew the debts could not be repaid, but they wanted to kick the can down the road and avoid dealing with the fact that their export addiction could not be maintained.”

Friedman points out that problems caused by government-imposed austerity in countries like Greece have been amplified by governmental intrusion into their economies. For example, many workers in fields such as medicine and other services are state-controlled with these workers being employed by governments. Therefore the austerity programs have more significantly affected the middle class then would have been the case had the private sector controlled a larger part of the economy.

Greece cannot repay its debt. This is not only because they barrowed too much capability under normal conditions, but also because with unemployment rates exceeding 20% in many industries, their economy generates little revenue to maintain critical social services, let alone repay debt.

What started as an economic problem caused by excessive debt is now morphing into social issues that are rocking European stability. This is a major theme Friedman’s article as he concludes:

  • “Europe’s mainstream political parties supported the European Union and its policies, and they were elected and re-elected. There was a general feeling that economic dysfunction would pass. But it is 2015 now, the situation has not gotten better and there are growing movements in many countries that are opposed to continuing with austerity. The sense that Europe is shifting was visible in the European Central Bank’s decision last week to ease austerity by increasing liquidity in the system. In my view, this is too little too late; although quantitative easing might work for a recession, Southern Europe is in a depression.”
  • “Virtually every European country has developed growing movements that oppose the European Union and its policies. Most of these are on the right of the political spectrum. …. The left has the same grievances as the right, save for the racial overtones. But what is important is this: Greece has been seen as the outlier, but it is in fact the leading edge of the European crisis. It was the first to face default, the first to impose austerity, the first to experience the brutal weight that resulted and now it is the first to elect a government that pledges to end austerity.” 
  • The issue then is not the euro. Instead, the first real issue is the effect of structured or unstructured defaults on the European banking system and how the European Central Bank, committed to not making Germany liable for the debts of other countries, will handle that. The second, and more important, issue is now the future of the free-trade zo 
  • “There are then three drivers in Europe now. One is the desire to control borders — nominally to control Islamist terrorists but truthfully to limit the movement of all labor, Muslims included. Second, there is the empowerment of the nation-states in Europe by the European Central Bank, which is making its quantitative easing program run through national banks, which may only buy their own nation’s debt. Third, there is the political base, which is dissolving under Europe’s feet.”

Friedman is concerned about the specter of war once again raising its ugly head in Europe. Most find this a very improbable. However, the history of Europe has been one where peace has not been the norm. Further, during the Clinton administration there was a war in Yugoslavia and today it is occurring in the Ukraine. Add to this history the toxic mix of economic hardship and what is considered unlikely increases in probability.

Today’s instability of Europe, both economic and geopolitical, has its roots in Progressive activism that created unstable borders and economic rules within the continent. This is similar to what the Europeans created in the Middle East after World War I. The resulting mess in the Middle East has led to decades of violence that continues today. Unraveling the mess the Europeans created within its own borders will be just as complex.

The New Drivers of Europe’s Geopolitics is republished with permission of Stratfor.

The New Drivers of Europe’s Geopolitics, By George Friedman

For the past two weeks, I have focused on the growing fragmentation of Europe. Two weeks ago, the murders in Paris prompted me to write about the fault line between Europe and the Islamic world. Last week, I wrote about the nationalism that is rising in individual European countries after the European Central Bank was forced to allow national banks to participate in quantitative easing so European nations wouldn’t be forced to bear the debt of other nations. I am focusing on fragmentation partly because it is happening before our eyes, partly because Stratfor has been forecasting this for a long time and partly because my new book on the fragmentation of Europe — Flashpoints: The Emerging Crisis in Europe — is being released today. Read the rest of this entry »

Posted in economics, European Union, Greece | Tagged: , , , , , , , , | 1 Comment »

Student Debt Strangling Younger Americans

Posted by Steve Markowitz on September 21, 2014

Reason.com published some incredible and scary figures relating to student debt including:

  • In-state tuition has increased in some states from about $3k annually in 1991 to over $10k last year.
  • Private college tuition in 1983 cost about $18.5K, but by 2013 climbed to about $41K annually.
  • Between 2008 and 2013 the average tuition/fees at public four-year colleges/universities increased by 19% above the rate of inflation during that five-year period. During the same period, private colleges/universities increased by 14%, which was larger than the 9% increase for the previous five years.

The trend is unsustainable and has led to significant damage to younger Americans.  For example, between 2004 and 2013 there is been a 400% increase in student loan debts to $1 trillion. During this same period the New York Times reports that there has been an 8% decrease in home ownership among 25-34-year-olds.

The $1 trillion educational debt saddled on younger Americans will be a drain on overall economic growth for years to come. This demographic is generally a significant consumer, but will need to pay off debt rather than spend on other goods and services.

Debt BombThe educational debt bomb is a direct result of governmental intervention in higher education. The government subsidized and guaranteed student loans irrespective of ability or willingness of individuals to repay them. In addition, the easy loan policies removed incentive to students to study fields that would result in better paying jobs.

As for the educational industry, it has reaped significant benefit from governmental largess. In addition, this industry’s access to an ever increasing student base that was created by the governmental loan programs allowed the industry to become bloated and inefficient and has been a direct cause of the cost of education increasing more significantly than the inflation rate.

Irrespective of past policy failures, President Obama recommends doubling down on these programs. The President’s proposals include capping student debt repayment at 10% of their monthly income, yet another disincentive to earn more. Not only will this further increase borrowing by this demographic and result in still higher education costs, but it will also cost US taxpayers approximately $11 billion according to Politico. What a perfect calamity. When will they ever learn?

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Corporate Bonds at Record Levels

Posted by Steve Markowitz on August 28, 2014

The Wall Street Journal reported that corporations are issuing US bonds, i.e. taking on debt, at record levels.  This is the third consecutive year for a record.  So far for 2014 the issued bonds are just shy of $1 trillion.

When corporations sell bonds, typically this is done to raise funds to be used for future expansion.  Such expenditures are usually productive and can be beneficial to the economy as a whole.  However, these are not normal economic times.

With interest rates remaining at record lows for years, companies are taking advantage of this abnormality, issuing debt to refinance previous loans, or merely holding cash with the belief that interest rates will rise in the future.  This hoarding of cheap cash creates economic imbalances with consequences to play out in the future.

The Fed’s low interest rate policies have not created an environment for a sustained economic recovery.  It can be argued that these policies have in fact delayed the recovery by not allowing supply and demand to meet their natural levels.  In addition, many who rely on fixed incomes, such as the elderly, are being hurt as their incomes decrease.  Finally, the artificially low interest rates have led to equity valuations that are now in bubble territory.  The world got a taste of the downside of bubbles in 2008.

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GOOD DEBT VS. BAD DEBT

Posted by Steve Markowitz on August 3, 2014

Good Debt Bad Debt cover JPEG.Over the years this Blog has written about the problems caused to businesses, the economy, and greater society emanating from the over usage of leverage; i.e. debt.  I have just published a book, Good Debt, Bad Debt and a Better Way Forward, that not only exposes the hazards of excessive debt, both private and sovereign, but also shares a real life experience creating a successful business without over leverage.

There are two basic long-term approaches to running a business: You can run it on what it earns or you can run it on debt.  Debt can be a beneficial financial tool if used to finance increased productivity and growth.  However, it is too often used to finance short-term gain for a few at the expense of the greater entity.

Business is about experience, winning and losing.  Good Debt, Bad Debt and a Better Way Forward is about creating and doing business without resorting to excessive debt, while growing a successful entity implementing that philosophy.

GOOD DEBT VS. BAD DEBT

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