Making Money
The interest rate crisis has just begun
Nov 25, 2024
Edward Chancellor, a financial historian and author of "The Price of Time," delves into the fallout from historically low interest rates, including unaffordable housing and rising inequality. He warns that the worst economic impacts might still be ahead. Chancellor discusses the role of interest rates in fostering 'zombie companies' and the widening wealth gap. He also critiques the exploitative nature of payday loans amid these trends and offers insights into navigating current market dynamics, especially for tech valuations and investment strategies.
01:20:10
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Quick takeaways
- The drastic reduction of interest rates since 2008 has sparked a housing crisis, inflating property prices and increasing household debt levels.
- The emergence of 'zombie companies' due to low interest rates hinders economic dynamism by stagnating productivity and stifling innovation.
Deep dives
The Importance of Interest Rates in Finance
Understanding interest rates is crucial for comprehending modern economic systems. Interest rates have a significant influence on both credit growth and speculative behavior, shaping overall market dynamics. As noted, significant changes, like the reduction of interest rates in 2008, led to historic lows that have affected productivity, housing affordability, and income distribution. Insights indicate that low or negative interest rates may distort economic activities, leading to mispriced assets and potentially creating future crises.
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