Monday, May 1, 2017

The Bleedin' Obvious

From "Fisher Dynamics" in US Household Debt, 1929-2011 by J. W. Mason and Arjun Jayadev (Draft: March 11, 2014). Obvious, but very well said:

When there is the possibility of default, both debtors and creditors will be concerned with debtors' capacity to service existing debt... The greater is current debt, the larger will be the contractually fixed debt-service payments, and the more likely the unit is to face difficulties meeting them.

All else aside, the greater the current debt, the greater the risk of macroeconomic troubles arising from debt. I hope it's obvious!

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