Tuesday, December 02, 2008

Leverage

Leverage has leached into every corner of life.

  • A young person buys a new television with no deposit, no interest and no repayments until 2010.
  • A woman who inherited a house from her parents uses the equity to buy four more.
  • A hedge fund uses bank credit to amplify the profit from trading in shares and commercial paper.
  • A young man leases a new truck from General Motors for three years.
  • A young woman maxes out four credit cards to spend $20,000 on a trip to Asia.
  • A new married couple takes a 100 percent mortgage to buy their first house.
  • A church pays for a new building with a mortgage, assuming that future tithes will pay the interest.
Leverage was everywhere. Everywhere that leverage went, pain is following close behind.

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