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I hope you're right. The extent to which you might be right or wrong depends to some extent on how much debt there is in the system (or how leveraged/wound up
by blip54321 5y ago
I hope you're right.
The extent to which you might be right or wrong depends to some extent on how much debt there is in the system (or how leveraged/wound up the economy is).
A debt-based economy is much more vulnerable. Last time we raised interest rates rapidly, in the eighties, household debt was less than half of what it is today, adjusted for GDP.
- listenallyall 5y agoYes, whenever rates eventually rise, it's going to hurt some people. People and companies burdened with debt. Some will in fact go bankrupt (most will not, of course). But that's not a reason not to do it, all that is, is more evidence of fiscal irresponsibility. Any company which is unable to withstand higher debt costs is just as poorly managed as one which is unable to withstand a rise in any other input cost. If McDonald's went bankrupt tomorrow claiming rising beef costs, you'd say their business plan was flawed, being overly reliant on subsidized farming and not planning ahead for contingencies. The same is entirely true for a company that is bankrupted by higher interest rates. Making excuses and accommodating heavy debtors by keeping rates artificially low is one of the most damaging things you can do.
- hndamien 5y agoThe caveat is that the currency is being debased and interest rates are being manipulated, forcing people out on the risk curve.