What Is Debt And Its Implication
Posted on January 31, 2008
Filed Under Uncategorized
When a creditor agrees to pay money against some assets of the debtor. These days in modern society, a debt is created with expected repayment usually with interest. If one look back to our history, this debt trap was the sole reason for the creation of bonded laborer and indentured servants.
Debt is usually what is owed, normally referring to assets owed. But the term “debt “ covers other obligations also. So far as assets are concerned , debts are present means of future purchasing powers. Companies who are in these business, use debt as a part of their finance strategy.
Debt facilitates people to do things of their ambition which they will not be able to do otherwise. Usually people use debts route to purchase houses , cars and many other things which are too expensive to do by available cash in hand.
Many big time Corporates use debts to leverage the investments made in assets. Excesses in debt accumulation is blamed for economic problems. Excessive debts and its resultant excessive expectations on future returns leads to ripples in the stock market . When the bubble bursts and expectations gets corrected , deflation and credit crunch follows causing the inevitable depression in the market scenario.
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