Magazine article Management Review

Time to Hunker Down

Magazine article Management Review

Time to Hunker Down

Article excerpt

Oyez, oyez! See America's financial balancing act! Watch the amazing corporate debt pyramid! Between bank financing and junk bonds, it's already topped the U.S. defense budget by a hefty $100 billion on its way up to the $400 billion mark. Yep, folks, a daredevil corporate America has managed to tie up 8 percent of GNP in LBO financing! To paraphrase Senator Everett Dirksen, a billion here and a billion there, and pretty soon you' talking real debt. And are we talking debt ! Ours is a debt-driven society. While we Americans carry plastic credit cards that allow us to buy today what we promise to pay for tomorrow, the Japanese carry debit cards, putting aside money today for what they expect to spend tomorrow. Inflation and rising real-estate prices have helped mire us further and further into debt.

The scales are collapsing under the weight of debt, and it all spells bad news for business-particularly small business. Many entrepreneurs are learning that good credit histories and a sound product line aren't enough to keep banks from pulling their lines of credit these days. (See story page 12.) Bankers respond-with accuracy-that they are merely acting prudently in an uncertain business climate.

It's high time the financial community learned prudence. Like modern-day Ponce de Leons, we have too often wasted our expertise in search of magical shortcuts to the hard job of business-building. E.F. Hutton was right-money must be made the old-fashioned way. It must be earned. …

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