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> Debt-financed spending means that future money is not going towards goods and services. This is a major hole in my current understanding of economic theory.
by sirclueless 15y ago
> Debt-financed spending means that future money is not going towards goods and services.
This is a major hole in my current understanding of economic theory. My gut reaction tells me that being in debt should be bad but if you think about it, it's really a good place to be. If the general monetary supply is inflationary, then money you owe is gradually losing value. Which is an excellent proposal for those in debt: do nothing and wait, and you will owe less material value. So when you say that "future money is not going towards goods and services" I am at least a little OK with that, because future money isn't worth as much as money today, in actual fact.
- sethg 15y agoI can only borrow money (or sell stock in my company) if someone else is willing to save (or invest). A healthy economy requires a balance between borrowers and savers.
- Game_Ender 15y agoInterest usually fixes that equation nicely. Typically inflation is 2-3% and right now the cheapest money you can get is around 4%. So even with inflation factored in holding onto your debt will cost you more then paying it off right away.