Distinguish Productive Credit From Consumptive Credit

Formulation

Judge credit by whether it increases future income enough to service the debt.

Use When

Use this when evaluating borrowing, investment, leverage, or policy stimulus.

Do Not Use When

Do not assume "productive" from stated intent alone. The relevant test is whether the financed activity actually raises future income or productive capacity.

Source Support

Dalio teaches this distinction around 00:10:05-00:10:37, contrasting borrowing for consumption with borrowing for productive capacity.