5/8/13

ABOUT DEBT

Debt does not cause slow economic growth. It is the symptom of a weak economy, not the cause.

The reason countries get into debt is because they did not generate the wealth to buy things the citizens wanted. So we borrow to buy those things. But eventually the bondholder wants to be repaid. But if we did not generate enough wealth to repay the bond holder we get in trouble because we have to spend less in order to pay the interest.

Eventually there is a transfer of wealth from us to the bondholder. Income differential increases. The point is debt is not the problem. The issue is low productivity. We are not productive enough in generating wealth. Our leaders should be concerned more about how to make the country more productive and not in finding ways to repay the bondholders and cutting debt.

We need to increase our low productivity. It is the only answer to the malaise of high debt.

George Dagnino, PhD Editor,
The Peter Dag Portfolio.
Since 1977
2009 Market Timer of the Year by Timer Digest
Portfolio manager

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1 comment:

Stock said...

But instead of looking at ways to increase productivity, the majority are looking for more handouts as Rome burns.