> now, i need somebody to explain to me - so, i'll pick on you dennis, since you
> mentioned it - why certain kinds of debt are 'bad for capital'. that is, why
> isn't debt just a highly effective from of discipline?
Debt isn't bad for capital at all, actually -- it's the essential lifeblood of the thing. Debt ties together fictional, speculative capital with industrial Things Which Make Stuff, and it also greases the wheels of consumption, by creating fresh demand out of nothing (or nearly nothing, all debts are supposed to have some sort of collateral plus a projected return). My point is just that, from the long-term point of view, bank capital is a mighty efficient way of investing in industry and things which get you a long-term return; equity or stock market capital is mighty unstable, and can come unglued at any moment for no good reason, but is quite mobile and thus beloved of wealth-seeking rentiers who want to make the proverbial fast buck. And taking out bank debt in order to speculate short-term, as the US is doing right now, will someday land us in a heap of trouble. The biggest debtor in the world is the US, and the biggest creditors are the EU and Japan. If this banana trade war with the EU goes any further, things could get ugly for the US -- the EU now has the heavy euro-artillery trained squarely on Bob Rubin's mug, and he's got to know this.
-- Dennis