as such it survived on free money when interest rate is low buy when interest rate is high it will find it difficult to survive the present as banks chasing for payment
if cannot raise fresh capital Tech might face insolvency
Highly indebted or highly geared or companies with high borrowings will be hit hardest by rising interest rates if they have little earnings or assets to sell for emergency cash buffer
As rates rise it will be more expensive to borrow or refinance Banks will be reluctant to lend as credit worthiness will be compromised
thus it will descend into 3 levels and spiral down
1. The need to give pp or private placement to raise capital by discount up to 10% to 20%
bad for existing shareholders as they shares will be diluted
2. Giving Rights issues to ask help from shareholders also bad as people now face liquidity crunch as well
I can recall that our BNM have been stopped from increasing the interest rate further and stayed at 2.75% which is already burdening the borrowers when repaying their loans with the banks.
The few banks that have been brought down to their knees was due to the increment of interest rates successively in the recent months following the war in Ukraine. The policy makers in the USA could have made a big mistake by increasing the interest rate which has worked against their financial condition.
This issue of inflation following the higher cost of production for goods and services from the Ukraine war must be accompanied by excessive cash at the disposal of the consumers (purchasing power) in order to justify the increment of interest rate/borrowing rate that can tame the inflation.
How can we control the inflation when the consumers have limited cash/savings to spend? This lack of cash ( arising from high unemployment or lost of income from the COVID19) did not work well from the higher borrowing rates set by the policy makers/central banks.
For a long time, having a huge national debt, the US now wanted to attract funds from every where back into their shores, by increasing the rates/deposit rate without realizing the consequences on their local bond market.
Now the man on the street which survived from FED hand outs suddenly face two dilemmas
1. No more free money from FED
2. And the results of so much "free or fiat or fake printed money " caused a spike of inflation as too much money in the system now chasing so few goods
The US economy need one that is organic instead of manipulative economy. The economy theory that touching on interest rate will not work well for inflation this time around.
They need to produce/productive, jobs, savings instead of spending excessively, keep on borrowing and printing money. And by now, financially USA is already beyond the redemption when considering the amount of debts and the cost of the debts.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
calvintaneng
56,917 posts
Posted by calvintaneng > 2023-03-08 17:16 |
Post removed.Why?