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Re: Fed Economists Warn Of Looming Disaster Due To High Interest Rates 

By: Zimbler0 in 6TH POPE | Recommend this post (1)
Wed, 05 Jul 23 5:25 AM | 27 view(s)
Boardmark this board | 6th Edition Pope Board 		Msg. 44120 of 60008
(This msg. is a reply to 44119 by Decomposed)
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The above is a reply to the following message:
Re: Fed Economists Warn Of Looming Disaster Due To High Interest Rates
By: Decomposed in 6TH POPE
Wed, 05 Jul 23 4:53 AM 		Msg. 44119 of 60008

Zimbler0:

Re: “If the corporations took out low interest loans . . . Assuming the loans were fixed interest at those low rates . . what is the problem?”Over-leveraged is over-leveraged. It's never good, no matter what the interest rate might be.

Many companies took on too much debt after getting used to refinancing as a means of making excessive debt manageabl. But with interest rates up, refinancing is not an option.

On top of that, some American companies got the low rates they did by taking out variable rate loans. When rates fall, variable rate loans are wonderful. But when they rise, it's a different story.

So the scenario you describe isn't the reality. A lot of companies took on more debt than they could afford, expecting rates to stay where they were or to even go lower. They gambled and they lost.

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