2046
Picture taken from their Twitter
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
this post was submitted on 14 Sep 2023
2046 points (99.2% liked)
Games
31273 readers
1851 users here now
Welcome to the largest gaming community on Lemmy! Discussion for all kinds of games. Video games, tabletop games, card games etc.
Weekly Threads:
Rules:
-
Submissions have to be related to games
-
No bigotry or harassment, be civil
-
No excessive self-promotion
-
Stay on-topic; no memes, funny videos, giveaways, reposts, or low-effort posts
-
Mark Spoilers and NSFW
-
No linking to piracy
More information about the community rules can be found here.
founded 1 year ago
MODERATORS
And it's most costly to increase interest rates not because those directly affect the investors, but because those interest rates affect the borrowers since the borrowers will need to make more and more money to be able to pay back the initial injection + interest.
If borrowers don't think they can pay back, then they probably won't borrow in the first place. If they do borrow but don't make enough to pay back those loans + interest, then the investor loses out.
And if borrowers don't borrow in the first place, then investors sit on their money when they could theoretically inject it into other businesses so they can earn on what they own, and not just let their assets stagnate (or decay). To investors, this might also be perceived as a loss.
Do I have that right?
In principle, yes, although two things to note:
Borrowing isn't always the active part. When a company is listed on the Stock Exchange, then investors play the active role by buying or selling their stock.
Most investors don't just have tons of money laying around. They have property, which they can list as security when borrowing money from banks. And then they lend that borrowed money to companies seeking(/allowing) investment. That means:
a) With high interest rates, investors do have a need for their lent money to pay out, too. As do the banks, because they borrowed it from the central bank.
b) Ultimately, lots of money will be given back to the central bank. The money is effectively removed from the economy then. If you've ever heard that inflation comes from too much money being in circulation, that's how that ties back in.
I'm no expert either, though. I'm just summarizing what makes sense to me and what I've learnt from making this post a few weeks ago: https://feddit.de/post/2514573
Oh I see, so it's like a merry-go-round, and everyone wants to have their money returned with more than they borrowed so that not only can they have some left over for themselves, but to also pay back those they themselves borrowed money from in order to lend in the first place. Recursive lending/borrowing up until the central banks, like you said.
Risky stuff. If any single entity along that lending/borrowing chain/network flops, it can send shockwaves to everyone else, all the way back to the central bank.
Thanks for the 2 cents.