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Funded by taking on debt. Using new debt to pay back old investors. I think there is a name for this strategy?
by weezin 5y ago
Funded by taking on debt. Using new debt to pay back old investors. I think there is a name for this strategy?
- liquid153 5y agoFonzi Scheme
- robbedpeter 5y agoAaayyyyy!
- bushbaba 5y agoSmart. Why wouldn’t you do this in sustainable amounts. For example many Americans don’t pay off their mortgage as the money is better put in investments long term. Why should our country be any different? Why shouldn’t the government borrow money at low rates to spend in ways that raises gdp generating new tax revenues that are higher than the interest paid for said loan?
- Ir0nMan 5y agoBecause gov spending is not limited to only that which has a positive economic return. If it was we wouldn't have this problem.
- Fezzik 5y agoThey may not pay it off, but they have to at least make monthly payments to pay the principal down. For good reasons no bank is going to give a mortgage holder an ever-increasing line of credit on a home mortgage.
- jfengel 5y agoBut only because the mortgage holder is going to die one day. That's the big difference between you and a corporation or nation. The country can revolve its debt forever. There is a limit to how much debt it can support, but it's determined only by that country's productivity and tax structure. As long as it can pay the interest, it can keep growing its debt. Eventually that reaches equilibrium, but there's no reason for any particular $BIGNUM to be the equilibrium point. It's currently around 10% of all spending, which strikes me as a large but not unsupportable number.
- bushbaba 5y agoYou can get an interest only mortgage.
- toomuchtodo 5y agoIt's more like the wealthy's "buy, borrow, die" strategy [1] without the cumbersome "buy" part. Japan's debt to gdp is almost 200% as the population decline continues. Confidence won’t evaporate until the market determines productivity can’t meet the yield bought. Somebody is going to be left holding the bag, but it ain’t anybody investing today. [1] https://www.youtube.com/watch?v=8pBPZMUcsh0 https://www.youtube.com/watch?v=8pBPZMUcsh0
- missedthecue 5y agoIsn't the biggest investor in Japanese debt the Bank of Japan?
- deleted 5y ago[deleted]
- lettergram 5y agoYes https://www.statista.com/statistics/756192/japanese-government-bonds-by-type-of-holders/ https://www.statista.com/statistics/756192/japanese-governme...
- drumhead 5y agoRefinancing old expensive debt with cheaper debt, while waiting for inflation and economic growth to devalue the priciple. It standard and pretty sensible.
- npwr 5y agoIn french we call it "une cavalerie". I did not find an english word.
- weezin 5y agoPonzi Scheme!