It is no secret that excessive public debt weighs down an economy, leaving it vulnerable to shocks. But just as a fast-moving cyclist cannot simply stop pedaling, governments cannot suddenly halt all borrowing; to remain upright and in control, they must eliminate their deficits gradually.
TOKYO – In the early years of the twentieth century, Charles Ponzi, an Italian migrant to North America, had a seemingly brilliant moneymaking idea. He would offer huge returns on worthless investments, thereby convincing a growing number of people to give him their money, which was used, in lieu of profit, to pay off earlier investors. Ponzi’s eponymous scheme was essentially a way to enable businesses to rack up debt forever. But, of course, it was ultimately just a scam – and, indeed, it landed Ponzi in prison.
TOKYO – In the early years of the twentieth century, Charles Ponzi, an Italian migrant to North America, had a seemingly brilliant moneymaking idea. He would offer huge returns on worthless investments, thereby convincing a growing number of people to give him their money, which was used, in lieu of profit, to pay off earlier investors. Ponzi’s eponymous scheme was essentially a way to enable businesses to rack up debt forever. But, of course, it was ultimately just a scam – and, indeed, it landed Ponzi in prison.