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Just throwing this in the air: in the 1970, getting off the gold standard made it possible to take much more debt in varied ways. This probably enabled the rich

by 127 5y ago

Just throwing this in the air: in the 1970, getting off the gold standard made it possible to take much more debt in varied ways. This probably enabled the rich and the corporations to drain a much larger part of the economy for themselves. Also throwing this in the air: debt might not actually increase productivity unless it's explicitly only used for productive purposes. Even then it seems dubious. The whole argument of using debt to build a business smells funny. Right now if you look, people who have access to cheap debt, are buying assets with it. A lesser version of this has been probably going on for decades.

zby 5y ago
"The whole argument of using debt to build a business smells fnny" - so what is the alternative? Do you believe that equity is the only way to finance a business?
- notsureaboutpg 5y ago
  I believe in many societies this was the main way to finance businesses, or profit sharing investments (essentially equity). This is because in olden days, outstanding debts could land you in debtors prison or essentially leave you enslaved to the person to whom you owed a debt so people were not as willing to take on debt for financing a business
- 127 5y ago
  Smells funny because it's used to defend so many different pathologies. Alternatives? Break up big banks that are too big to fail. Build up many small, local banks that actually give a shit about their surrounding community.
Gustomaximus 5y ago
> The whole argument of using debt to build a business smells funny. I think this conflates generally running at a loss with debt, but there is also positive investment. E.g. Many property developers run on ever increasing debt as they grow, and many of these business do really well. They are using debt to create something of value, sell it and then replay debt. But if a company is using debt (or equity) to keep growing with overly hopeful future profitability plans, then yeah this is not good. Both use debt, one is totally normal and common. The other 'smells funny', so I feel it more about the value creation the debt is used for to build the business than the actual debt.

by 127 5y ago

zby 5y ago

"The whole argument of using debt to build a business smells fnny" - so what is the alternative? Do you believe that equity is the only way to finance a business?

notsureaboutpg 5y ago
I believe in many societies this was the main way to finance businesses, or profit sharing investments (essentially equity). This is because in olden days, outstanding debts could land you in debtors prison or essentially leave you enslaved to the person to whom you owed a debt so people were not as willing to take on debt for financing a business
127 5y ago
Smells funny because it's used to defend so many different pathologies. Alternatives? Break up big banks that are too big to fail. Build up many small, local banks that actually give a shit about their surrounding community.

Gustomaximus 5y ago

> The whole argument of using debt to build a business smells funny. I think this conflates generally running at a loss with debt, but there is also positive investment. E.g. Many property developers run on ever increasing debt as they grow, and many of these business do really well. They are using debt to create something of value, sell it and then replay debt. But if a company is using debt (or equity) to keep growing with overly hopeful future profitability plans, then yeah this is not good. Both use debt, one is totally normal and common. The other 'smells funny', so I feel it more about the value creation the debt is used for to build the business than the actual debt.