by Bradley Boucher

Created on: January 21, 2011   Last Updated: January 22, 2011

Greed was the main problem that created the financial crisis the world is in with many companies and individuals buying more than they can afford with the belief that they can pay it off later or that future profits will cover the debt. The truth was the future profits couldn't and people couldn't pay their debts back so why do it?

There are all sorts of different reasons why people took loans they couldn't pay and companies and businesses became so leveraged they couldn't afford to cover day to day expenses. Some reasons were the straight forward ones such as people just want more money and power , but the truth is if you smart and know how to use debt correctly you can make your returns so much higher than without it. For instance when you buy shares without buying on margin your return will be significantly lower than when you buy on margin and you use the repayment of the borrowed money to write off against your income to lower your taxes.

Companies and businesses also need debt to grow and without that human instinct of greed a company will remain stale and fail with other companies and businesses buying them out or just taking over the whole market share. Truth be told business is just about what returns you can make for the amount of equity you put in and everyone has the greed to want more so loans and leverage go hand in hand with greed to increase those returns

So the golden question is is greed and leverage a bad thing? the answer is no and because in this financial climate you need both to increase returns which is the aim of business. The conservative approach will get you only so far and will not give you the kind of returns you want. With all this being said about greed being good blind greed is bad for example Lehman Brothers who leveraged the bank to breaking point all because of blind greed of money and power.

Careful analysis of the returns should be made with hours of research, ratios and graphs about the business ventures options with loans and leverage. So be greedy and buy on margin or take that loan for your business, but make sure you not leveraged out more than you can pay back and make sure the investment is a financially secure one. 

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