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On the last point, interest rates aren't the only thing that matters to loans. The default rate also matters. If I borrow a billion dollars from you to pay myse
by civilized 3y ago
On the last point, interest rates aren't the only thing that matters to loans. The default rate also matters. If I borrow a billion dollars from you to pay myself and I have no good plan to pay you back, it doesn't matter how low interest rates are, you'll still be out a billion dollars.
- fencepost 3y agoIf the business is still viable with the debt load, the bank continues to get paid on the loan but whoever owns the company doesn't get much profit. There are plenty of businesses or there that exist but don't thrive or grow, the PE sucking of vitality just moves businesses that might have thrived into that category.
- polygamous_bat 3y ago> If I borrow a billion dollars from you to pay myself and I have no good plan to pay you back, it doesn't matter how low interest rates are, you'll still be out a billion dollars. In a hypothetical zero interest rate world I can keep paying you the $0 "interest" to not have to pay back the billion. Only when the interest rate goes up do we find out who actually had any intention to ever pay back the original.