Why is there a debt crisis? Dario believes that debt is inevitable, and the debt will tend to be more and more until it exceeds the repayment ability. There will be a debt crisis at this time. Some people may ask, is it bad to be in debt? Dario believes that debt is actually beneficial to social and economic development, which is equivalent to bringing future money to the present and promoting economic development. But people often have the inertia of living within their means. In fact, it is no problem to live within our means. As a boss, it is a good behavior to predict the company's income to borrow money, expand the company's economic scale and seize the market. The problem is that the company's economic income will not keep growing, and the business environment will encounter various problems, such as rising rents and employees' wages. When the cost really rises to the point where the income can't repay the loan, the debt crisis gradually appears. In fact, personal loans are similar to companies. Nowadays, most people in society buy houses and cars by borrowing money. Everyone believes that their income can pay off the loan. When your income increases and you want to change to a bigger house or a better car, new loans will increase. Suddenly one day, when the source of income is lost, these loans will immediately become a personal debt crisis. Rational use of loans can also help us increase our income. For example, if the rising trend of house prices can be higher than the interest of borrowing, then the money we borrow from the bank is helping us make money. On the contrary, our debts will continue to increase. Then buying a car is actually a real debt. In addition to daily fuel consumption, a car should be maintained regularly. Buy insurance for the vehicle. These expenses are all debt expenses. Reasonable use of loans can help us become richer.
Dario believes that the debt crisis can be roughly divided into two categories: one is the debt crisis of deflation and the other is the debt crisis of inflation. The debt crisis of deflation is mainly manifested in that the market is in a state of tight currency circulation and there is not enough currency in circulation. Inflation is the outflow of capital, which leads to the unsalable domestic products. These two crisis models Dario summed up a model, which is divided into six stages. First, the rising process has three stages: prophase, bubble and peak; Then there is the decline stage: depression, deleveraging and normalization. According to Dario's quantitative analysis, a complete cycle takes almost twelve years on average. Through this model, we can sum up the essence of debt crisis and the imbalance between supply and demand of cash flow. Debt is expanding, and the demand for cash flow exceeds the cash flow that the economy can provide. After the imbalance between supply and demand, cash flow collapses, and it must be recovered through a slow and painful process.
To sum up, the main core content of this interpretation is that in an economy, borrowing is inevitable, and debt will always increase until it exceeds the repayment ability, and a debt crisis will occur. The debt crisis has two stages, from the early stage to the bubble and then to the peak, and then to the depression, deleveraging and normalization. In the final analysis, the essence of debt crisis is the imbalance between supply and demand of cash flow. After the crisis, the rulers should adopt policies to help restore the balance.