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The problem is, this time they can't pull the interest rates lever like they did with the Volcker Shock, because we have so many zombie companies that would ins
by fallingfrog 5y ago
The problem is, this time they can't pull the interest rates lever like they did with the Volcker Shock, because we have so many zombie companies that would instantly fold if they couldn't keep rolling their debt over.
- bequanna 5y agoThis isn’t at all true. In addition to very favorable net income/interest expense ratios, most large companies have increased the duration of their debt. So, pretty low interest expense relative to income plus longer dated, low interest debt. Will refinancing some of this debt be more expensive if rates increase? Maybe a little, but this definitely does not look to be a systemic risk.
- fallingfrog 5y agoOK, but during the Volcker shock interest rates when up to 18%. Not just a little. Go to an online loan calculator and try this: If you have a loan for 100k dollars, and the interest rate is 4%, your payment is 477 dollars a month. If the interest rate is 18%, the payment is 1507 dollars a month. The difference is not minor.