People, businesses, and governments borrow for one of two reasons: hopeful optimism or fearful desperation. If it's the first, borrowers see a rosy future. They expect to enjoy the fruits of their loans which, when they come due, will either be repaid or refinanced. Because everyone is upbeat, credit is easy to find and relatively cheap. Desperate borrowers, by contrast, are up against the wall. They urgently need the money, but their repayment prospects are cloudy and, therefore, they struggle to secure credit that, if available, often carries crushingly high rates.
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