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Feb 23, 2009 -- Debt is at the center of business failures, not the economy
Failing businesses all have their excuses about why they're going bankrupt. The sales guys will tell you it's because of the advertising slowdown. The retailers blame the drop in sales. The manufacturers blame the decline in manufacturing. And on and on…
Is that what's really going on?
Well, partly…but the one consistent factor with most every failing company is that they carry a massive amount of debt. There's no wiggle room; anything less than absolutely perfect market conditions can be disastrous if you're over-leveraged.
In the corporate world, a lot of the debt comes about through mergers and acquisitions. You know the drill: Big fish eats little fish, using borrowed dough in the process.
Look at Toyota -- the largest automaker in the world -- as an example. Toyota is losing big money because they took their eye off quality and put it on growth. Now they're in their first year of losses ever since starting in 1937!
Think about how this applies to your own life and finances. Anything -- a job loss, a divorce, an illness -- can put your wallet at risk if you have taken on a lot of debt. Be very careful when deciding to introduce more debt into your budget.
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What others are saying
The programs will NEVER end.
Hey Duster, when was the last time you saw a federal government program reduced or ended? Sure we can end the stimulus programs whenever we like -- just like a crack addict can stop whenever they feel like it!
LOL, some people are so naive...
The market indexes don't reveal the proper prices of actual stocks based on fundamentals, but reflect the fear or greed of the speculators who follow them. When the economy recovers (you still need goods and services), those who know how to do fundamental analysis will make a huge profit buying low and selling high. As for the "deficit", if the government owes the money to itself, it can also forgive itself the debt. Just call it debt forgiveness (don't laugh, they do this all the time for third world debt). Yep, problem solved.
to magic pinko
Well, on whose watch, WITH THEIR ECONOMIC PHILOSOPHY, did this economic disaster come about? It appears that the "laboratory of life" has shot your theory down. The measures being proposed by the Obama administration are NOT intended to be permanent, but to be a temporary stimulus; why is that so hard for some people to understand? We've been in similar economic straights before; study your history circa 1932.
So we’ve got a Prez of a different color, but of the same substance, promising freedom and delivering bondage, to government bloat, pork, waste, and feelgood slogans. Can’t let the economic crisis go to waste, must take opportunity to enlarge government as much as possible, so that the private sector never recovers, and everyone will work for the government instead, just like in pinko-land paradise. After all, if everyone works for the same employer, pays maximum taxes, and produces the same, then everyone is equal and equally happy; justice had been served. And think, when all the dirty little capitalists finally move to China (the new promissed land of economic opportunity), we will be so much better off, free to devote our time to our favorite passtimes, such as over-eating on fast food, watching and making porn, doing drugs, playing violent video games, and popping Ritalin, Prozac, and Viagra, while maxing out our credit cards and the national debt! Yes, the best is yet to come!
