IMF urges China to speed up action on mounting debt
Joe Mcdonald, AP Business Writer
ricky l
Debt driven growth is a risk - definitely.
A company cannot have too high a leverage on liability based on debt.
Otherwise the burden to service the debt - paying interest will be too heavy.
It will eat into the profitability of firms, cause strain on the bank and financial system - and if default on payment - the whole Economy will collapse.
If more firms collapse and cause banks to accumulate too many bad debts - it will cause a run on banks - and cause an Economy meltdown - due to de-multiplier effects.
Job losses will follow as business fails.
A company cannot have too high a leverage on liability based on debt.
Otherwise the burden to service the debt - paying interest will be too heavy.
It will eat into the profitability of firms, cause strain on the bank and financial system - and if default on payment - the whole Economy will collapse.
If more firms collapse and cause banks to accumulate too many bad debts - it will cause a run on banks - and cause an Economy meltdown - due to de-multiplier effects.
Job losses will follow as business fails.
ricky l
IMF warning and the credit ratings - are alarm bell for Countries to focus on their vulnerabilities in the Economy and remedy them - before they become a problem or worst become a monster too big and too late to be remedied - and have to undertake austerity - like Greece --- then too many people will suffer.
John
What about the US?
- 36 seconds agoricky lRemember the sub-prime crisis that US have to undergo - and the hercules effort that Obama Administration have to undertake through "credit easing" to turnaround the Economy?
When "troubling signs" emerged, remedies have to be administered as quickly as possible - become it become a big issue.
The World Economy are very tightly integrated nowadays.
Any issue in one Country will trigger a domino effect - and pull down other Economies as well.
