First let me give you a common definition and example of self-liquidating debt or a self-liquidating loan.
Self-liquidating debt represents borrowing that will boost economic activity and therefore will stand an excellent chance of ‘paying itself back.’ The simplest example would be a case where you could borrow money at 5% but loan it out, risk free, at 7%. Here the loan will clearly ‘pay for itself.’ More typically, self-liquidating debt has a productive asset tied to it, such as a utility company, an apartment building, or a factory which generates the income to pay off the debt.
The debt that the vast overwhelming majority of Americans accumulate is not self-liquidating. Piling up debt to purchase clothing, golf clubs, and pricey trips to the hair salon will not generate income, although I admit it is best not to appear in the work environment naked. You get my point.
Now we know — provided you’ve read any of this blog — I’m odd. I and other members of my family have practiced a form of self-liquidating debt when purchasing homes and other property. This works by creating and funding a trust that cuts a mortgage with the bank and uses return on trust investments to service the debt. this works remarkably well and keeps the Internal Revenue Service (those thieves) unhappy.
The above is likely the first time I have given an example on this blog of how one ‘gets ahead.’ This is just one example of many many other ways to structure ones livelihood and desire to build wealth. It is an indicator of the basic belief that I owe other Americans nothing via wealth transfer imposed upon me by the Federal Government. It’s not my fault you have an IQ of 80 and will never read nor write, not because you are mentally retarded with an IQ of 80, but because you’re of a mindset that expects others to provide for you.
This particular post came to pass this afternoon due to a banker once again locating my local offices Dunn & Bradstreet and wanting to know if perhaps we needed to set up a business line of credit. NO. For all of you who rather argue politics and think the sun rises and sets in the ass crack of one Barack Obama, you really wouldn’t know the true circumstances of the world economy and you wouldn’t notice businesses are hording cash, i.e. no borrowing unless it is the absolute only way to generate that income that, guess what, does something economically positive like create self-liquidating debt.
Like it or not folks, America’s economy will not hum until one Barack Obama is gone. To hell with his belief that it is ok to bankrupt a nation as long as it is for “social justice” or “social effect.”