I’ve been reading lately both about American history and the establishment of the National Bank, and the loans tried to be negotiated with the Dutch banks during the Independence War. At the same time, I’ve read a lot of folks having their Credit score lowered because of paying off either their cars or their student loans. Shouldn’t it be better if you didn’t ave any loans at all?
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Debt is a cheat that allows companies and people to acquire a lot of wealth in the short term ostensibly to buy large assets (like a house or a car) and pay it back over a long term.
Without debt the amount of wealth and buying power in our economic system is much much lower. If you had to save up to buy a house up front, very few people would be able to do that in their lifetimes.
This would inevitably lead to a large class of ‘have-nots’, people that spend their money entirely on living costs like rentals because they can never save up enough money to buy things up front.
Our entire society is obsessed with *keeping up with the Jones’s* and unsustainable economic growth and expansion.
Where things have gotten insane with debt though is leveraging.
Companies for example borrow money using their own company and assets as collateral. The idea being that borrowed money can be used to grow the business and generate more profits that exceeds the interest they have to pay on the loans.
This leads to rapid expansion of business, but theoretically speaking a lot of businesses are so heavily leveraged that they are only 1 economic downturn, or a few interest points away from total collapse at any time!
It’s seen as good business practice, but really it’s economic gambling.
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