It seems to be a common theme in this country, especially as our economy is only gradually emerging from a period of nationwide deleveraging that is achieved through lower spending and hence lower economic growth, and especially when that lower growth is compared with previous periods in which economic growth was significantly abetted by excessive debt financing all around.
In the 1990s, they grew on the backs of excessive debt financing, options-charged executives and capital-appreciation happy investors.
The bubble that burst that year was a result of trends dating back to the 1970s, including American consumers taking on excessive debt to finance consumption, despite their stagnant incomes, and the low interest rates made possible by Japan and China, which recycled their huge trade surpluses into purchases of U.S. debt to keep their currencies artificially low and their exports competitive.
Limiting the deductibility of net interest as many other developed countries do would discourage excessive reliance on debt financing but would yield higher tax burdens on manufacturing and utilities, sectors with significant investments in physical capital that are often debt-financed.
Nor is the example of Leeds United, a team that only a few years ago was briefly among the best in Europe but has since been relegated amid a financial crisis brought on by excessive debt and whizzy financing techniques such as making asset-backed securities of its top players.
To combat the excessive use of debt financing, many countries recently introduced new interest deductibility restrictions (see e.g., Webber 2010).
In this regard, it is believed that excessive use of debt financing increases firms' probability of becoming financially distressed and thereby exacerbates or perhaps even causes economic downturns.
Rather, it was all the issues that Minsky stressed, such as excessive debt, imprudent shadow banking activities, Ponzi finance, asset pricing bubbles, and weak regulation.
Excessive debt as a result of asking for money from others in order to finance their drug habit.
Even though Law's inflation effectively wiped out two-thirds of the French monarchy's debt, France's lack of a British-like financing system soon saw the regime again sink into the quagmire of excessive debt and taxation.
Lies about its public finances instilled the belief, particularly in Germany, that the euro's problem was excessive debt, and the solution was tough spending cuts.
