Debt, Drugs And A Missed Opportunity For 'Good' Deflation?
By CFA Institute:
By Ron Rimkus, CFA
Could somebody please explain to me how more debt solves the world’s problems? Go ahead . . . I’m waiting. In the meantime, the Wall Street Journal this week published a piece suggesting that banks (through loans from their central banks) are providing more support for their respective sovereign bond markets, making sovereign defaults less likely to occur. In contrast, Bloomberg published an article on the same topic suggesting that the banks supporting the bond markets are making them more vulnerable to a collapse. According to the Bloomberg article, as more of the bonds of a particular country are owned by local institutions, there is less willingness to support the sovereign debts of other countries. While this is an important discussion, it is secondary to the larger question: Why is more debt the answer to these countries’ problems? Either the world can survive with more debt,Complete Story »