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Debt

Discussion in 'Off-Topic Forum' started by Notmyrealname, May 20, 2020.

  1. Notmyrealname

    Notmyrealname DI Forum Luminary Highly Rated Poster Showcase Reviewer

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    I would be interested to know your opinion on this. Some say debt drives economies (including State debt for infrastructure) and others say it is building on rocky foundations. Since QE became popular debt has rocketed - the experts say it debases a currency but the USD seems to be doing well (being a reserve currency does of course help).
     
  2. Jens K

    Jens K DI Forum Adept

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    state debt isnt much of a problem as long as the state can pay it's interest and is trusted to be able to do so in the future as well. Inflation has to be kept in check but so far it does not seem to be much of a problem (in US / EU)

    personal debt imho is a bad thing, especially when used for buying stuff that's lost half of it's value the moment you bought it. I'd make an exception for a buying a house or so but otherwise stay away from it.

    For corporations it's something in between - usually good to finance investments with debt since the expectation is that the return is bigger than the interest paid. borrowing to pay operating expenses is hardly a thing that'll last long.
     
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  3. Rye83

    Rye83 with pastrami Secured Account Highly Rated Poster SC Connoisseur Veteran Army

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    Pretty much what Jens K said.

    Personally I have never had any debt aside from one small car loan ($3k on a $27k vehicle) about 20 years ago. That was only to establish some credit history. Any other debt I have is my monthly expenses on credit cards that I pay off in full every month. I think it is a good idea to only buy things you have the cash for but I understand that our economy would look nothing like it does if everyone did that or was on the FIRE path. The winners need the losers just as much as the losers need the winners.
     
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  4. OP
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    Notmyrealname

    Notmyrealname DI Forum Luminary Highly Rated Poster Showcase Reviewer

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    And, of course, inflation erodes debt - both government and personal.

    In fact, inflation is a bit like sex - you need some but not too much (although I am sure many here would disagree with the latter) :smile:
     
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