There's three kinds of debt. One is corporate. A company took on debt to buy some equipment. That can be mis-investment, but it's usually pretty good.
Second, there's personal debt. That counts both mortgages (usually worthwhile, unless you buy more house than you need) and stuff like credit card debt, where you're still paying for Christmas five years later. So, some is worthwhile, some not so much.
Third, there's government debt. This can be used effectively to create infrastructure. The problem is, though, that it's allocated not by a careful cost/benefit analysis. Instead, it's allocated by politicians. This kind of debt therefore has the highest propensity to be sheer waste.
Well, there's some situations where it is so obvious to use debt that you don't need a cost/benefit analysis.
For example, let's say you discover a large deposit of gold on land you own. You could use debt to buy the mining equipment to mine the gold.
Another example is if terrorists demolished all the bridges between Manhattan and Brooklyn. The government doesn't need a cost/benefit analysis to decide to use debt to rebuild some bridges.
AnimalMuppet|10 years ago
There's three kinds of debt. One is corporate. A company took on debt to buy some equipment. That can be mis-investment, but it's usually pretty good.
Second, there's personal debt. That counts both mortgages (usually worthwhile, unless you buy more house than you need) and stuff like credit card debt, where you're still paying for Christmas five years later. So, some is worthwhile, some not so much.
Third, there's government debt. This can be used effectively to create infrastructure. The problem is, though, that it's allocated not by a careful cost/benefit analysis. Instead, it's allocated by politicians. This kind of debt therefore has the highest propensity to be sheer waste.
a3voices|10 years ago
For example, let's say you discover a large deposit of gold on land you own. You could use debt to buy the mining equipment to mine the gold.
Another example is if terrorists demolished all the bridges between Manhattan and Brooklyn. The government doesn't need a cost/benefit analysis to decide to use debt to rebuild some bridges.