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To: neolib who wrote (257533)6/29/2010 10:01:49 PM
From: Elroy JetsonRead Replies (1) | Respond to of 306849
 
Your observation is precisely the stupidity peddled by the Reagan gang.

Debt by itself is not a problem. The cost of debt can be.

With a central bank there is no independent free market rate for money. As a consequence, the more debt that's created, the lower interest rates go.

So you can easily grow credit until interest rates are effectively zero, what economists call "zero bound". At this point you get an economic depression / deleveraging.

This is precisely what is occurring.
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To: neolib who wrote (257533)6/30/2010 3:27:08 AM
From: Skeeter BugRespond to of 306849
 
>> Debt by itself is not a problem. The cost of debt can be.<<

that's not entirely true. the *potential* cost of debt and the deterioration of one's credit quality ARE problems, too.

just like pulling the pin on the hand grenade tied to your leg is a problem.


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