4 ms·
See also the "Austrian business cycle theory". But the bust, while clearing the economy of a lot of mal-investment, goes on for quite a painful while before the
by anthony_r 7y ago
See also the "Austrian business cycle theory". But the bust, while clearing the economy of a lot of mal-investment, goes on for quite a painful while before the previous level of output/employment/prosperity is matched.
https://en.wikipedia.org/wiki/Austrian_business_cycle_theory https://en.wikipedia.org/wiki/Austrian_business_cycle_theory
- rexreed 7y agoAre you implying that venture funding at previous levels is a function of low interest rates (that's the theory in ABCT linked above). I don't think that specifically applies here. While it's possible venture funding is accelerated by low rates, this was not the case in the late 1990s prior to the 2000s dot-com crash. Rather we're seeing a Black Swan event causing macroeconomic pull back, and it's pulling back the covers on companies that really had no fundamental underlying value or support. The only real exit for these companies was acquisition or public markets. But with both exits now drying up, there's nothing but overvalued, overfunded companies with revenue streams (if they have any) drying up faster than the glaciers are melting. The fundamentals were never there, and it was only the fat-times of VC investment keeping them afloat. There might be a role to play with ABCT with regards to VC investment as a whole, but this downturn is more than just a normal business cycle.
- Marazan 7y agoAh yes, ABCT. First, assume the market is made up of rational actors. Second, assume that sustained irrational investment choices have been made by the rational actors.