(Categories: ECONOMICS, DEBT, CREDIT)
Sunrise or sunset on the economy? Keep an eye on your bank account.
Through the labyrinth of internet blogging I came upon a post about Credit so well written that even I think I understand it, and that is something.
A couple of excerpts:
“The key to the proper use of credit is that it is invested in productive enterprises at a high rate of return.”
“A high rate of return (i.e. a high interest rate) leads lenders to transparently accept risk, and entrepreneurs to only borrow for the highest-return enterprises. A low-yield, high-risk investment is not worth funding. We call these mal-investments or unproductive uses of capital.”
“In our era, the Federal Reserve and Federal policies have massively incentivized mal-investment and unproductive uses of capital. Low interest rates destroy the needed discipline on both lenders and borrowers to only risk capital in the highest-return, lowest risk uses.”
The entire brief article can be viewed here: The Proper Use of Credit
Another post that caught my attention on this site was: The Real Cyprus Template (the one you’re not supposed to notice)
This writer is prolific and there is a lot of food for thought on the website.
I found my way here via http://austrianaddict.com/. (Austrian economics, not a love of Hitler.)
I found that by way of http://necessaryandpropergovt.wordpress.com/.
All are a noteworthy circle of sites in which to browse.