The Phaserl


Detroit the Start of the U.S. Death Spiral of Debt?

by George Leong, Investment Contrarians:

Debt is deadly, and it’s made even worse with rising interest rates that prevent you from eliminating the debt load. What happens with rising interest rates is that payments mostly go toward the interest and less to the principal. In fact, it’s what I call a death spiral of debt that worsens as rates move higher.

When individuals face excessive debt, often the solution is to pare down on spending and adhere to a strict debt repayment program.

When corporations face excessive debt, they tend to streamline; but they must be careful when they do so, because any cost-cutting could impact the company’s growth. What generally happens is more debt or credit is issued.

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