The late economist Hyman Minsky defined three ways of borrowing......
- Hedge borrowing where borrowers were able to pay interest and principal out of income.
- Speculative borrowing were the borrower could pay the interest but not the principal and relied on someone paying the same price for the asset like he did
- Ponzi borrowing were the borrower could not pay the principal nor the interest and hoped that he be bailed out by the next buyer.......
Well worth a read.
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