I'll keep it short : Greed
this post was submitted on 14 Aug 2023
378 points (95.0% liked)
Asklemmy
43943 readers
100 users here now
A loosely moderated place to ask open-ended questions
If your post meets the following criteria, it's welcome here!
- Open-ended question
- Not offensive: at this point, we do not have the bandwidth to moderate overtly political discussions. Assume best intent and be excellent to each other.
- Not regarding using or support for Lemmy: context, see the list of support communities and tools for finding communities below
- Not ad nauseam inducing: please make sure it is a question that would be new to most members
- An actual topic of discussion
Looking for support?
Looking for a community?
- Lemmyverse: community search
- sub.rehab: maps old subreddits to fediverse options, marks official as such
- [email protected]: a community for finding communities
~Icon~ ~by~ ~@Double_[email protected]~
founded 5 years ago
MODERATORS
Planet Money has a lot of good podcasts about this.
If you’re curious about the problems that surrounded low interest rates, this is a good one.
https://www.npr.org/2023/04/14/1170103587/interest-rates-mortgage-summers-blanchard
pay out investors from money that other investors gave them
But nobody would base a serous business on such a premise, would they? This sound like a ponzi scheme!
That's how every bank works. If every customer tried to withdraw their money at once they couldn't pay.
I knew it! Better keep it under the mattress.
Too many reasons to list so I’ll add another
Stocks are only ever allowed to go up, if they go down you risk death
Covid caused massive increase in some stocks, now those companies need to find new ways to create revenue from the base they had prior to Covid to out match the base they had during it
Some companies had drop in stocks during Covid, they need to make it up to their shareholders so they don’t lose confidence
Race to the bottom.
DRS GME
Your post is obviously mainly about interest rates, which wasn't clear from the headline. Why do you think higher interest rates equal "everything going to shit"?
load more comments
(1 replies)
There was a global supply chain shortage due to COVID. This meant that the demand for everything backed-up. This was compounded by people having more time at home and potentially more money to repurpose from services to goods, so the shift also drove up demand. When there is more demand for goods than the amount available, the cost of goods sold goes way up until you reach a threshold where people are forced to buy less or go broke. This is the elasticity of demand. Their is a point where certain goods are no longer appealing in price or affordable in general. It’s really bad when these are mandatory commodities like food.
This runaway inflation is always dealt with in the same way. The central bank raises interest rates for their notes/loans that they make with the banks across the country. This makes consumer and business loan interest rates rise, which makes them less appealing and also staves free cash flow, so people have less money to spend from loans, but potentially their salaries might be affected as well. This has the benefit of forcefully lowering demand. Whenever demand goes down, the cost of goods will start to go down. During the lull of demand, the supply chain can catch up as well. This is not the first time interest rates were raised to fix runaway inflation. Over time, interest rates will go back down again. It is cyclical.
One difference though is that the government is also in a cycle of under-regulating and over-regulating business. At the moment, we were promised more monopoly-busting and cracking-down on driving up prices in a collusive manner to fight the fed’s deflationary tactics and attempt to make windfall profits. Meaning, whole industries are not supposed to band together behind closed doors and agree to not lower their prices. That is called collusion and is supposed to be illegal. As long as that keeps happening, interest rates will keep getting hiked. The current administration seems to have more of a tolerance for this than they should. If things are going to shit, it’s due to this type of corporate cronyism with the government.
Additionally, you have outside actors like China who are buying up land and businesses and contributing to the turmoil in clever ways like making housing and food less affordable.
Source: Am MBA.
Because you're online way too much
What do you mean by “everything?”
Apparently just banks and loans from his post
I guess, most specifically the offerings from mega-corporations. I was quoting a hyperbole there, I did not mean to actually talk about everything.
I figured that. Just curious if you had some specific examples of things that have gone to shit.
But at the same time, this meant companies didn’t have to be profitable, because they could pay out investors from money that other investors gave them???
There's a bit of this, but it's not the main way everything ever worked.
The hiking interest was to combat inflation by discouraging people from borrowing and spending, but the reduction in spending can also push some companies out of business and start a recession. The economy isn't booming but we don't have a global recession yet either, so I'm not sure I'd even say they're "going to shit" at the moment.
Different entities rely on each other too much, so when a number of them have gone down, it began to drag the rest down, like a human tower that could no longer hold itself up. It doesn't help people think nothing needs to change about their economy, like maybe add a few rules on how it works, no reform needed. But no, apparently it's perfect.
