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???
Our societies have been built around our economies. The underlying premise of our economies is that they must always grow in the long term to sustain itself and generate returns.
Permanent growth is not sustainable. Nothing in this universe just grows forever without significantly changing state. Not even the universe itself or imaginations do that.
Resources are finite and at some point, the costs outweighs the returns. The choice then is how quickly to shrink. A sudden collapse is the most dangerous option but possibly the fastest before returning to growth, a slow shrink is less destructive but for a much longer duration and it may not be fast enough to prevent outright collapse. This is where we are right now, and why banks are tinkering with rates.
The question for me is: Will tinkering with our economies slowly be fast enough to outpace our outstanding environmental debts and the interest accruing on that.