Debt A Mirage Always Moving Into The Distance

A great deal of our economic system is about debt. It is important to remember not all debt is created equal. A mirage is a naturally occurring optical phenomenon in which light rays are bent to produce a displaced image of distant objects. Joining the idea of a mirage and contagion with the reality of collapsing debt forms an interesting subject. It is important to remember all debts and obligations do not come due at the same time. Also, it must be noted when a bill is not paid or defaults it often starts a long and drawn out legal battle, this collection process that may extend years without harsh consequences. This my friends is the reality of modern life in America and much of the world.

Money Owed Can Be Like A Mirage Always In The Distance

For an individual the rules are different than the rules that govern a company or business but even after stretching out payments and outright default options exist. Bankruptcy can give those reaching the end of their rope a new lease on life. I feel sorry for those of us who have found themselves in the position of having to decide whether to most throw good money after bad by taking legal action against a debtor in the hope of recovering even part of what we are owed.

Companies and business in general play by a set of rules that can boggle the mind. Other than not meeting their payroll a situation that is immediately noticed, they can bob and weave in a series of moves to hide their true situation. Bringing in a new investor, shafting a current supplier after a big order and replacing them are just a few ways to extend the life of a dying business.  By stalling on paying bills a business can claim it is still solvent and reorganizing will set everything straight. If done correctly the top management can collect paychecks the entire time this unfolds. Debts unpaid are more than a transfer of wealth it is theft.

Government's can also play this game. They sell bonds, print money, make promises, and can even borrow from groups like the IMF. The Bottom-line remains that after all is said and done debts that are not paid still require someone has to write down their wealth and take a loss. The tool of reinventing what a debt is and how it will be paid is very useful. A key issue in deciding and controlling how debt is handled revolves around the issue of contagion. When the debt holder realizes that they will not be made whole, how they adjust paying their debts because of their newly gained knowledge can upset the whole economy. A big collapse without much notice that surprises the world can make a big wave that is unacceptable.

Those in power tend to constantly move the goal post wrapping the changes they make under a banner of reform. It sometimes appears that the laws covering bankruptcy were devised to drag on and on so as to lessen the blow or take sharp edges off reality. Often after years of chasing a bad debt, the person or group owed a sum of money has in reality moved on and adjusted to the fact they are likely to recover very little of what they are owed.  Modern society has become very good at kicking the can down the road and delaying the day of reckoning. Yes, the part where you collect a debt that you are owed can be similar to a mirage that keeps moving away each time you approach it. This means that at some point the return on loaning money is simply not worth the risk!



  Footnote; This post dovetails with many of my recent writings. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged. A more recent article delves into why people might simply stop lending,
 http://brucewilds.blogspot.com/2014/06/the-economic-efficiency-of-credit-can.html