Because the funny thing about borrowed money is it's a debt to you but an asset to the lender.
Not only is your debt listed as an asset on the lender's books--it's collateral that supports whatever financial leverage the lender might engage in.
If you default on the debt, not only is the lender's assets impaired--all his leveraged bets built on the collateral of your debt are suddenly impaired, too.
The preferred solution nowadays to a spending/debt crisis is to borrow your way out: if you can't pay the interest and debt that's due, just borrow more to cover the interest payments and roll the old debt into new loans.
The other solution is to roll the defaulted debt into new loans at near-zero rates of interest that allow the borrower to pay a nominal sum every month, just to maintain the illusion of solvency. If you owe the bank $10 million, the bank loans you $11 million at .01% rate of interest and you promise to pay $100 a month.
The City of Greensboro
has more than $102,000,000 in short term variable debt.
...is either the borrower or lender actually solvent?
Of course not.
Another trick is to guarantee the borrower is solvent.
...the empty guarantee is enough to smooth things over and maintain the illusion of solvency right up to the moment when the house of cards collapses.
TPAC
Debt and all these tricks to mask insolvency work the same on household debt, corporate, municipal and national debt.
Many of these scams are being routinely applied to public debt like Greensboro's.
Why? To avoid the consequences of losses being forced on overleveraged private banks, other lenders and the big developers. Were those losses to be taken, those entities would be insolvent: their assets would be auctioned off, their shareholders, bond holders and creditors would receive pennies on the dollar (if that) and the lender and developers would close their doors.
The losses to the Greensboro's Real Estate and Financial Aristocracy, pension funds, highly leveraged entrepreneurs etc... would be immense.
If you can't print money or slash expenses, you have to borrow more money. The more you borrow, the greater the odds that in the next downturn after 2008-9, which appears to be occurring, you won't be able to pay your bills, the interest on the debt, and roll over debt coming due into new loans or let legally separated LLC's go under.
That's the template for many North Carolina's local governments, banks and over-leveraged real estate, retail and other interests.
North Carolina's government's have soaring pension, Medicaid and employee healthcare obligations, but their tax revenues are either stagnant or prone to boom and bust cycles--and the current boom cycle is now entering the inevitable bust phase, when tax revenues plummet but the obligations just keep piling up.
It always ends the same way: default, more financial tricks to mask the default, and eventually, insolvency, bankruptcy and massive losses being distributed to everyone foolish enough to choose financial trickery over dealing with reality back when the pain would have been bearable."
http://www.oftwominds.com/blogjuly15/Greece-template7-15.html
