9 ms·
Do you know of any good articles explaining the concept of 'good debt'? I understand the position that govt taking debt out if the funds can increase economic
by cwkoss 10y ago
Do you know of any good articles explaining the concept of 'good debt'?
I understand the position that govt taking debt out if the funds can increase economic growth->more tax revenue. However, this concept seems to break down when debt is carried over year to year and used to pay interest expense on other debts.
- kcanini 10y agoIf you can borrow money at X% and put it towards a productive use that generates Y% returns, then it is worthwhile to do so when X < Y. The government can currently borrow money at around 1-3% interest [0], depending on the length of the term. Presumably, the return you can generate from borrowed money diminishes as you borrow more money, so "good debt" is some amount of money that you have borrowed that allows you to be more productive and pays for its own interest, in a sense. But borrowing even more than that would start to become less useful, and drag down your overall return. [0] https://www.bloomberg.com/markets/rates-bonds/government-bonds/us https://www.bloomberg.com/markets/rates-bonds/government-bon...