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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (104786)	9/3/2009 3:18:01 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 110194

I get the fact that you believe debt is a magic charm which generate wealth, and if only the government provides enough "productive" make-work jobs we'll be able to keep the debt bubble foaming away. So you think that all debt is bad, eh? What about the guy who has a great invention, but can't get outside capital to support him? How many successful people were just a few steps from bankruptcy, with 2nd and 3rd mortgage on their homes, racked up their credit limits, and borrowed from family members in order to get their product to market? Debt that leads to revenues and earnings that more than exceed the debt maintenance is not foolish.. That's smart. Like when my father purchased a number of rental properties for cash back in 1992. He could have purchased twice as many if he had borrowed 1/2 the money he needed, since those rents paid him an average of 15% on his money. He didn't do badly, of course.. They more than doubled in value and paid themselves off to boot by the time he sold them a few years ago. That's an example where debt would have been a good strategy. But debt to purchase discretionary items that are non-essential is a fools game. Just like debt to purchase a vehicle that's going to depreciate by 1/2 within 3-4 years. I don't believe I'll ever purchase a new vehicle again. But there's another wrinkle in all of this with manufacturer financing. The consumer can probably due without their product, but the company needs those financing charges, as well as the sales of their product. So who will ultimately be worse off, the consumer or the company that financed their purchase? Capitalism runs on capital which doesn't exist without savings. Yep.. and savings comes in various forms. It can be deposits in a bank, or money invested in an IPO or Secondary offering. People throwing money into their 401Ks and IRAs every month is savings (though maybe not the best idea). It could be investment in an illiquid real property asset like Real Estate. And btw, the majority of the savings that financed our most recent bubbles have been Chinese savings. Hawk