Saturday, June 22, 2013

Borrowing addiction

We have to get back to finance (the times). Our first post on that was in 2007. The topic was tranching. A recent post had the same topic. To me, the whole notion seems to be like wanting perpetual motion. But, then, finance does not have any real grounding, nowadays, due to many things, such as fiat money.

Of late, another bit of errant thought has come to fore. People are leveraging to increase their equity stake. Again, leveraging (think of uses) is not bad. Improper focus? Yes, problematic.

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So, this week we had a downturn. Those who bought with borrowed money would suffer more after a loss, due to the pain of debt. So, that's the oops. To take this type of stance when it is obviously not wise.

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Yet, the central banks have fed the situation. Some use addiction as the analogue. Too, the whole emphasis seemed to have been to push people toward the more risky. And, there wasn't much jawboning about boneheads increasing their risk with debt.

Debt is a way to mortgage the future, pure and simple. We have been using debt far beyond what might be reasonable as the downstream pain is too remote for most to consider. Even those with progeny don't seem to get the drift of the issue.

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Hence, oops abound, as was said before.

Remarks:

08/01/2013 -- Ben cannot unwind or taper downhe has too many Doves. We'll have to get back to the king thing (yes, the divine rights of the CEO, new royalty, in other words) and dampening of these types by a new outlook (Magna-Carta'√≠sh).

Modified: 08/01/2013