Why Is Leverage a Problem?

When we get a recession, cash flows decline and the ability to service debt declines. If you then get mass defaults on debt, you take you towards bank bankruptcies. We all want to avoid depressions, obviously because ofth just human consequences of depressions. But i think central bankers it seared into their memory that what came after the great depression was a world war. So there are great fears of social, political dislocation associated with a great depression. And that is why governments will talk of this. It is just worth saying to meto that we had very high debt o gt p ratios afterward war, too, and the government decided to inflate those away. This was

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