The Debt Trap: How Borrowing Can Lead to Economic Collapse

This paper explores the impact of excessive borrowing on economic stability, arguing that while debt can provide short-term benefits, it can lead to long-term financial distress and even economic collapse. The paper examines the benefits of debt, such as providing access to capital and managing cash flow, as well as the negative consequences, including high-interest payments, the increased risk of default, and inflation. Instead of relying on debt, the paper suggests that the government should focus on increasing productivity through investments in technology and the workforce. By importing a skilled workforce and adopting new technologies, the government can create new opportunities for economic growth and reduce the reliance on debt, ultimately leading to greater financial stability and long-term economic prosperity.

JEL codes: A10; B4; D0; D6; E0; E00

Keywords: Economic Development; Economic Growth; Leverage; Debt