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The system will seize up and collapse with anything close 20% interest rates. Look at what happened in September 2019. The rates shot back to 0 because there wa
by tmn 5y ago
The system will seize up and collapse with anything close 20% interest rates. Look at what happened in September 2019. The rates shot back to 0 because there was a liquidity problem in the repo market. The system is rife with zombie companies servicing their debt with nearly free debt. This will not go like the 70s. When rates stop increasing and go back to zero within the next two years remember this comment
- jjoonathan 5y agoThe 1979-1982 interest rate spike was preceded by 15 years of faffing around, playing at raising interest rates, and then chickening out, with a backdrop of rising persistent inflation. I think it's likely to play out exactly as you describe, but that's exactly how it played out in the 70s. I'm much less certain that it will end the same way, but there are big problems with all the alternatives too (yuan, euro, crypto, gold) so who knows.
- voisin 5y agoIf rates stop increasing and inflation continues with barely a pause, then what happens? We have massive social instability? Retirees are screwed? Lenders will have to increase rates just to earn a real return.