Thursday, 13 August 2009

Debt addiction

Zero interest rates tell us pretty much all we need to know about how our financial system works in the 21st century. The western economic system is totally addicted to debt but cannot face a cold turkey program.

As long as our policy makers can present forecasts and hopeful scenarios with even a glimmer of hope for a better future, as a society we will continue to use an inflated discount rate for future cash flows. With this in place we will continue to rationalize the fact that we can borrow more money from the future to feed our bad habits today.

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