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Those businesses were the ones that were either created in that environment, or who survived it long enough. The last time rates were this high, they were this

Those businesses were the ones that were either created in that environment, or who survived it long enough. The last time rates were this high, they were this high for decades. I fear the cliff scenario because a lot of business models now were built on a foundation of crazy-cheap debt. The tide is about to go out. Eventually the business environment will re-adjust to the new cost of money, but the transition will be tough.

lotsofpulp 4y ago
What rates are you referring to? https://fred.stlouisfed.org/series/fedfunds https://fred.stlouisfed.org/series/fedfunds Last time fed funds rates were as high as they are now was Jun 2019. And then a few more times before that.
- function_seven 4y ago
  Look at the 3-month (90-day) commercial paper rates. They're split into different data sets on the FRED site[0][1], changing in 1997. I combined them into a single chart here: https://ibb.co/h7c7DJS https://ibb.co/h7c7DJS (Is ImgBB a good site? I stopped using imgur after too many dark patterns) [0] https://fred.stlouisfed.org/series/WCP3M https://fred.stlouisfed.org/series/WCP3M [1] https://fred.stlouisfed.org/series/DCPF3M https://fred.stlouisfed.org/series/DCPF3M
  - lotsofpulp 4y ago
    Seems like it came down after 2007 and 2000 highs at similar levels. But who knows, maybe US government will leave it high. Maybe they will bring it back down to juice asset prices. Maybe the parameters of the world have changed to not allow that.
    - rory 4y ago
      > maybe US government will leave it high Although the Fed can backstop commercial paper in emergencies (and they did so at the beginning of the pandemic), it's extremely unlikely that they start taking on enough to move rates in the medium term (like they did with mortgage backed securities). So this is not a rate that the government controls except very indirectly.
- nostrademons 4y ago
  We had a taper tantrum in Jun 2019 - the commercial paper markets almost seized up, and the Fed started dropping rates then, a good 9 months before COVID. That's what business leaders remember. We couldn't service 2.5% rates in 2019 (actually more like 2%, it takes time before companies need to rollover their debt), it seems extremely doubtful that we can service 3.25% now.
imtringued 4y ago
What do you mean by crazy cheap debt? If you have a loanable funds model where all money that is not being spent is being saved then the interest rate is 0%. The fact that people don't save the money they don't spend has more to do with how cash works and how it makes it pointless to save.

lotsofpulp 4y ago

What rates are you referring to? https://fred.stlouisfed.org/series/fedfunds https://fred.stlouisfed.org/series/fedfunds Last time fed funds rates were as high as they are now was Jun 2019. And then a few more times before that.

function_seven 4y ago
Look at the 3-month (90-day) commercial paper rates. They're split into different data sets on the FRED site[0][1], changing in 1997. I combined them into a single chart here: https://ibb.co/h7c7DJS https://ibb.co/h7c7DJS (Is ImgBB a good site? I stopped using imgur after too many dark patterns) [0] https://fred.stlouisfed.org/series/WCP3M https://fred.stlouisfed.org/series/WCP3M [1] https://fred.stlouisfed.org/series/DCPF3M https://fred.stlouisfed.org/series/DCPF3M
- lotsofpulp 4y ago
  Seems like it came down after 2007 and 2000 highs at similar levels. But who knows, maybe US government will leave it high. Maybe they will bring it back down to juice asset prices. Maybe the parameters of the world have changed to not allow that.
  - rory 4y ago
    > maybe US government will leave it high Although the Fed can backstop commercial paper in emergencies (and they did so at the beginning of the pandemic), it's extremely unlikely that they start taking on enough to move rates in the medium term (like they did with mortgage backed securities). So this is not a rate that the government controls except very indirectly.
nostrademons 4y ago
We had a taper tantrum in Jun 2019 - the commercial paper markets almost seized up, and the Fed started dropping rates then, a good 9 months before COVID. That's what business leaders remember. We couldn't service 2.5% rates in 2019 (actually more like 2%, it takes time before companies need to rollover their debt), it seems extremely doubtful that we can service 3.25% now.

imtringued 4y ago

What do you mean by crazy cheap debt? If you have a loanable funds model where all money that is not being spent is being saved then the interest rate is 0%. The fact that people don't save the money they don't spend has more to do with how cash works and how it makes it pointless to save.