Was just trying to explain to someone why everything is going to shit, specifically companies, and realized, I don’t fully get it either.
I’ve got the following explanation. The sentences marked with “???” are were I’m lost. Anyone mind telling me, if they’re correct and if so, why?
The past few years, central banks were giving out interest rates of 0% or even negative percentages. Regular banks would not quite pass this on, but you could still loan money and give it back later with no real interest payments.
This lead to lots of people investing in companies. As long as those companies paid out more money than those low interest rates, it was worthwhile. 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???
This has stopped being the case, as central banks are hiking interest rates again, to combat inflation???
Yes and no. Increased consumption can stimulate an economy but there are are some limitations. This is usually only true if the economy is simultaneously building a middle class. There are also hard limits on improvements to technology and resource extraction. As such capitalists can’t always find ways to entice people to consume more. That leaves them with raising prices and suppressing wages if they want to increase profits.