I keep reading how in the UK it’s poor economic literacy for Rishi Sunak to use personal borrowing as an analogy for a country borrowing money. I’ve tried to read about it but I just get confused on the details, economics is just not a strong point. The credit card maxed out is easy to relate to just with bigger numbers, but I understand things don’t translate when going from small to big but I just can’t get my head around why in this instance.
In: Economics
It’s not automatically bad to be in debt. If I gave you 25 thousand dollars to buy a car to deliver newspapers with, would you rather buy the 25 thousand dollar car straight up with all that cash, or would you rather finance the car and pay it off slowly, month by month? Sure, if you just buy the car with the cash then you’re not in debt. But if you get a loan and finance the car monthly then you are free to use the 25 thousand dollars in cash on something else, and that can be good if that other thing helps you make additional money every month. Like maybe a 2nd car, paid with the cash. Now you have 2 profitable things instead of 1 profitable thing with that 25 thousand dollars. As long as you are smart about what you are spending your debt on, hopefully something that makes you MORE able to pay off your debt, then it’s a good strategic decision.
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