“Increased cash flow allowed TCI to borrow more money and pay higher total interest costs on it, which we used to buy still more cable systems.” That’s how cable television visionary John Malone described TCI’s evolution from light borrower into a substantial one in his excellent memoir, Born To Be Wired. As TCI’s present and future improved, so improved its lending terms.
Malone’s recall is a highly useful way to understand what credit is, and how it expands and contracts. Contrary to popular perceptions among central-bank obsessed economists, credit is an effect of production. Nothing else…
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John Tamny is Founder and President of the Parkview Institute, editor of RealClearMarkets, senior fellow at the Market Institute, and Senior Economic Adviser to mutual fund firm Applied Finance Group. Tamny is the author of eight books. His latest is The Deficit Delusion: Why Everything Left, Right and Supply-Side Tell You About the National Debt Is Wrong. His others are Bringing Adam Smith Into the American Home: A Case Against Home Ownership, The Money Confusion, When Politicians Panicked: The New Coronavirus, Expert Opinion, and a Tragic Lapse of Reason, Popular Economics, Who Needs the Fed?, The End of Work, and They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers.
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