The Great Magnifying Glass

Regardless of whether the economy is surging or crashing, debt is always a topic of discussion in the media.  Whenever the news cycle shifts to US budget deficits,  it creates a renewed focus on the impact of debt.  This is important because most of the developed world is deeply indebted.  The most important thing to understand about debt is exactly what it is, and by extension, what it is not.

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Good Debt, Bad Debt, No Debt?

Throughout the lexicon of financial advice in the marketplace, there are many different views regarding the role of debt in our lives.  The traditional view is that debt causes us to make interest payments that deplete our wealth and erode our ability to build wealth.  In the case of the mortgage crisis, many lending institutions and government agencies encouraged excessive lending to borrowers that were at very high risk of default.  This even prompted some financial authors to proclaim that all debt is bad, regardless of what it is used to finance, and regardless of how it is structured.

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