“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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