Leverage

Leverage

There is one more very interesting aspect of leverage or loans. If you were getting loans it means you had enough money and you did not need it. If you did not have money and you needed it then no one will lend to you.

Look at what was happening to people before sub prime crisis happened. There was enough liquidity, people had jobs and houses, their wealth was growing because markets were going up, property prices were going up and yes there were enough people to lend them.

Ask those people now, they need money now more then ever before but how many banks are willing to lend them? None I guess.