Great fortunes are built on the proper use of credit. Improper use of credit leads to mal-investment and wealth destruction.
by Charles Hugh Smith, Of Two Minds:
We cannot understand our fundamental financial problems if we do not understand the proper use of credit. Credit has a key role in capitalism; credit-starved economies are underdeveloped economies, as economist Hernando De Soto explained in his masterwork, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.
In the chronically underdeveloped economies De Soto describes, households have assets–land, dwellings, small businesses–but since the assets do not have legally recognized status as “property” (because the system for recognizing and registering property is both cumbersome and corrupt), they cannot act as collateral for borrowed capital, i.e. loans.
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