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Good Debt, Bad Debt

A respected financial author recently published yet another book predicting that ruin is about to rain down on us largely because the world is carrying too much debt. The world in this context means countries, banks, businesses, institutions, companies and individuals.

A few years ago one bright spark invented the concept of good debt and bad debt, which at least made the concession that all debt is not bad. Simplification rapidly hijacked these terms so that they came to mean tax deductible (good debt) and non-deductible (bad debt).

In my world the technical term “bad debt” stems from accounting terminology, where bad debt is simply one where you concede, however reluctantly, that the debt is never going to be repaid.

Most of the great fortunes of the world have been built by the judicious use of borrowed money. Careful management of controlled (i.e. affordable) debt is an ever-present character of the vast majority of the great companies and countries of the world.