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this post was submitted on 14 Sep 2023
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Is it just me or are all big companies killing themself right now?
Yeah, inflation rate is high, so central banks are trying to counteract that by basically slowing down the economy, so that our normally scheduled inflation countermeasures kick in appropriately. Well, and the usual way to slow down the economy is to make it more costly to loan money, i.e. increase interest rates. Which means investors can't just pump money into any company anymore, they want that money to actually pay out to cover those interest rates. And that means companies need to actually be profitable to get money to finance their operation.
So does that mean all these businesses were always doomed to fail anyways, just living on borrowed money/time, and now the bill comes due, they’re all fucked?
Kind of. In the past investors were willing to be more patient, and company values were artificially high, because they were based on potential profits rather than actual profits. That's shifting a bit as interest rates go up.