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

Disclaimer.The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Learn how to manage your portfolio risk and sleep comfortably. Improve the certainty of returns by taking advantage of business cycle trends. Learn to use simple hedging strategies to minimize the volatility of your portfolio and protect it from downside losses.
You will receive your user id to access 4 FREE issues – and all the previous ones - of The Peter Dag Portfolio. Email your request to info@peterdag.com. New subscribers, please.



Stock said...

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

Alice Brooks said...

Thank you for such an insightful post! I hope more people will realize that debt is just a cause and we should focus on increasing the productivity. However, being in debt could be stressful and make a person less productive. The help of sameday online payday loans company could allow you to take control of your finances. I think financial situation influences a lot our mood and mental state in general. It is important to understand what causes the problem to solve it and feel better. That is why I find your post so helpful.