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Running on your income?

The other day I was listening to a discussion about how the government could not function without being able to borrow.

The "expert" being interviewed put it this way: "Just imagine trying to run a business with only the money you earned. If all you had to work with was your daily take."

Now, I might invoke a storm of "you don't understand economics" comments here but this makes absolutely no sense to me. I have always run my business on the money I earned. I never borrowed to pay my bills. I did use credit for leasing and/or buying equipment and a couple of times for upgrades to the workplace. But my power bills, rent, materials and hardware were always paid out of existing revenue. OK, we had accounts with a few materials suppliers and hardware vendors, but these were more for convenience and the bills were always due and paid at the beginning of the next month. I never considered borrowing to make payroll or pay my rent. These were paid with money we earned.

These days, it seems like the common consensus is that a business cannot possibly survive on its earnings and must continually borrow, steadily increasing the debt load, in order to keep the doors open. I cannot shake the idea that any business that cannot generate enough capitol to operate, that must constantly borrow more money to make ends meet, cannot possibly survive. Ultimately, the debt load is going to become too great and the business will collapse under the weight of it.


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