The Positive Economic Impact of Debt

by | Jun 10, 2021 | Blog | 0 comments


Credit may get a bad warp, causing dread and fear in the lives of millions, but does it deserve it?

  • Credit moves the economy- each person’s credit line is like a pump that pulls money around in the economy by creating the ability to spend where it didn’t exist before. That may sound like a bad thing because, at first, you might imagine frivolous spending resulting in a maxed-out line of credit.
  • The stock market crash of 1929 is the textbook example of what kind of leverage credit can have on the economy, how it can generate growth, and how credit can upend an economy. Unregulated loans and credits created a robust economic bubble that burst. It might be the reason that many people cringe at the thought of debt.

Is Credit Really That Bad?

Credit is not all bad. Imagine instead what it does for the individual and the economy when used correctly.

  • While taking credit may mean taking a loss for the interest you’ll pay in the long run, it also means being able to participate in an economy that might otherwise be impossible.

Say my friend Brandon has a dream to open his burger and shake joint. Up to this point, he has a good plan and can cook some excellent food, but Brandon is just a regular guy who, without a loan, would likely never be able to make this dream a reality.

  • The loan that Brandon takes to start ‘Brandon’s Burgers and Shakes’ powers the economy in more ways by creating jobs through the people Brandon employs and stimulates the local economy, generating more possibilities for others.
  • This doesn’t even mention how impossible things like homeownership would be if not for mortgages.
  • It’s not practical to buy a home or start some businesses with savings alone. When used correctly, credit helps create these possibilities.
  • Credit is a powerful financial tool that can make or break finances; studying and understanding how it works will help you use it to your advantage.

Contact TetonPines Financial today to review your financial portfolio and let us make your money do the most for you.