In the fall of 2007, when the U.S. economy first seemed in peril, I began answering reader queries here on the Business Desk. I still do so, but this page has expanded to include posts from eminent economists, "far-flung correspondents," and a variety of voices that have intriguing and/or useful things to say about economics, broadly defined. Please feel encouraged to respond to any and all of them.
Question: Economists seem to agree that the debt cannot be sustained. I'm skeptical of this generality -- that is, not all debt is the same. Isn't it important to distinguish between the debt incurred to improve production and research, versus debt incurred for pure consumption?
Paul Solman: Absolutely. The first rule of debt: It's not how much you borrow; it's what you do with the money. What economists agree on is that UNPRODUCTIVE debt cannot be sustained. If you borrow money and use 100 percent of it to buy goods from China and oil from the Middle East for Sunday drives, you're unlikely to be rich enough, in the future, to pay back the interest and principal.
TrackBack URL for this entry: http://www.pbs.org/newshour/mt4/mt-tb.cgi/6091
Comments
Is All Debt Unsustainable?
**Question:** Economists seem to agree that the debt cannot be sustained. I'm skeptical of this generality -- that is, not all debt is the same. Isn't it important to distinguish between the debt incurred to improve production and research, versus debt incurred for pure consumption?
**Paul Solman:** Absolutely. The first rule of debt: It's not how much you borrow; it's what you do with the money. What economists agree on is that UNPRODUCTIVE debt cannot be sustained. If you borrow money and use 100 percent of it to buy goods from China and oil from the Middle East for Sunday drives, you're unlikely to be rich enough, in the future, to pay back the interest and principal.
