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21
JUL 10

All debt is not bad...




Debt is not a problem if borrowed for investment and the investment returns a better rate than the real cost of the money. That is called growth.

 

If however if real investment return (that is the return before fiscal subsidy) is less than the real cost of money growth can only happen as a result of asset appreciation – such growth is an illusion, or more accurately a delusion.

 

Speaking of delusions, idea that New Zealand can happily live off the farm and the theme park needs to be well and truly buried. Only at that point will we start thinking like an emerging economy and focus on building capability around the provision of real things that customers want.
 


tags: debt, growth
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