Replies to post #116450 on Zeev's Turnips Patch-No Politics (ZEEV)

[mainehiker]

yup..and on that line just now i transferred all remaining credit card debt to another card, with 0%apr til may 04.

[market_watcher]

It is really quite simple, if interest rates are so low that you have to pay only 1/3 of your internal rate of return on assets employed in the business, you want to increase debt exposure.

As much as this is absolutely right, the question is whether the current period is similar to the early sixties in being able to generate that kind of IRR. Intuitively, I don't think it is, but I'd be willing to change my mind.

[Joe Stocks]

>>a single sentence that negates the whole hollow argument, in this case it is: "The ratio of long-term debt to total liabilities now stands at 68.2%, the highest level since 1959, " <<

Zeev, Big picture...I don't know if we can compare anything in the past to what is ahead in the future. We got one basic problem out there that no one is really addressing. That is, fertility rates in most industrialized nations have been reduced to give us near, if not negative, population growth. Any comparison of the last century to today and the future could be skewed by the fact that the 20th century was one big "orgy" that gave us extraordinary growth. Your comparison that resulted after the event referenced above took place at a time of tremendous growth. If we look back at 1959 we just went through a period of unequalled population growth rates of any time. Debt had to be taken on and we got a little ahead of ourselves but after a few years we were back on track. Some argue that the economic expansion started with the birth of the first strong wave of boomers,1950-1957.


Things are different now. WE should be in a period of falling debt as the needs of the boomers should be relaxing. But, we are adding more debt. Problem is that we don't have the demographics to pull us out of this debt issue like we did in 1959. Personally I think 10-15 years from now when we look back at the charts we will still be trying to reach those highs of 2000.