Polonius Bound
With the new budget proposal before Congress and the free fall in equity values, we have seemingly embarked on a journey where a nation of equity -- in our homes, our stock accounts, our companies, our educational and non-profit institutions -- will see a dramatic shift in its debt-to-equity ratio. Yes, debt has increased in the previous decade, but that has been accompanied by a faster increase in equity values. http://tinyurl.com/c8ccmx
The mountain of debt that our government proposes to undertake -- and to force banks to lend -- at this time of plummeting equity values will result in an enormous pull on all other pockets from the economy -- particularly those sustained by equity, such as venture investment, educational institutions, and entrepreneurship generally.
The mountain of debt that our government proposes to undertake -- and to force banks to lend -- at this time of plummeting equity values will result in an enormous pull on all other pockets from the economy -- particularly those sustained by equity, such as venture investment, educational institutions, and entrepreneurship generally.
In this rush to embrace debt, we would do well to head the admonitions of Shakespeare in Hamlet:
LORD POLONIUS:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
The wholesale over-leveraging of our economy and society is likely to have sorry ramifications for our ability to take risks, experiment with new ideas and be flexible in the face of future cycles of confidence.
Equities are fundamentally a statement of faith in the future. Debt has its feet firmly planted in the past.
If Virginia Postrel is to be believe that future has its enemies, then debt is certainly one of them.
This certainly argues for a look at Luigi Zingales (UofC) proposal to de-leverage the residential housing market.
If Virginia Postrel is to be believe that future has its enemies, then debt is certainly one of them.
This certainly argues for a look at Luigi Zingales (UofC) proposal to de-leverage the residential housing market.
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