Although historically creditors have been despised, it wasn’t until the 1930s that debt itself became the target of criticism. With the rise of democracy, rulers would favour the majority who owe against those few who save. Debt is an explicit contract that requires, above all, stability of cash flows from the debtor. As monetary and fiscal policies generate instability, they also affect the indebted. In the twenty-first century, the focus has changed from debt itself to the signals and mechanisms that define it. The main signal is the rate of interest, and as such, it has been suppressed completely. We examine this phenomenon, as well as the different types of debt in which we can invest, from an Austrian perspective.
KeywordsDebt Democracy Equitization Interest rate Borrowing cause Labour Private debt Bilateral loans Syndicated loans Private placements Corporate bonds
- Investigations of Economic Problems, Hearings before the Committee on Finance, United States Senate, Seventy-Second Congress, Second Session, Pursuant to S. Res. 315, February 13 to 28, 1933.Google Scholar
- Von Mises, Ludwig. (1949). Human Action: A Treatise on Economics. Auburn, AL: Ludwig von Mises Institute, Scholar’s Edition, 1998.Google Scholar
- Draghi, Mario, President of the European Central Bank. (2016). Addressing the causes of low interest rates. Introductory speech held at a panel on “The future of financial markets: A changing view of Asia” at the Annual Meeting of the Asian Development Bank, Frankfurt am Main, 2 May 2016. Retrieved May 2016, from https://www.ecb.europa.eu/press/key/date/2016/html/sp160502.en.html