Borrow only what you can repay.

Around 30 years back banks in western countries would lend a maximum of 2.5 times your annual income to buy a home provided you did not have other outstanding loan repayments. Home loan mortgages are considered safe because no one likes to become homeless and you cannot run away with it. Then bank regulations were reduced and, following the 9/11 attacks, interest rates were reduced to 1% by Fed Chairman, Alan Greenspan. Banks went on a lending spree, even lending to people with bad credit histories. These were called sub-prime mortgages and to protect themselves they resorted to Credit Default Swaps.  Financial Markets nearly went into meltdown when Lehman Brothers went bankrupt and the US government had to bail out Fannie Mae and Freddie Mac. If private debt caused the great recession in the US in 2008 it was government debt which caused the east Asian crisis in 1997, and had to be rescued by the IMF under very strict conditions, following which most countries in Asia have built up strong foreign currency reserves. Argentina defaulted on its foreign loans in 2001 and has not been able to recover since. It was able reach a deal with its creditors which would allow it to write off its debt by paying 30 cents to the dollar so that it could start borrowing again. The vast majority of creditors agreed but some ' vulture funds ' bought the remaining loans cheaply and sued in a US court for full payment. US judges are know to be tyrannical so this one has not only ordered Argentina to pay the plaintiffs in full but stopped it from paying the other creditors, forcing it to default a second time. Venezuela's condition is even more dire. An oil economy it was ravaged by socialist handouts by Hugo Chavez. To borrow money it has to pay 11% more than US bond rates which is 12 times that of Mexico, 4 times that of Nigeria and double of Bolivia. Last May it raised $5 billion through private placement of 10-year bonds at a coupon rate of 6% but had to give 40% discount up front, which means it raised just $3 billion. So what about us. The Congress resorted to a policy of handouts to win elections which resulted in soaring fiscal deficit, current account deficit and double digit inflation. High inflation helps by reducing the real cost of debt. Government debt is around 67% of GDP which is not high and household debt is low but corporate debt is very high leading to concern. Bhushan Steel has a debt of Rs 351 billion with a net worth of Rs 26 billion, Videocon Industries - debt Rs 393 billion, net worth Rs 57 billion and Jai Prakash Power - debt Rs 269 billion, net worth Rs 41 billion. Banks must be held to account for defaults.