Asklemmy

Based on what you've posted here alone:

Companies that don't have to be profitable is not quite the case to make. They have to either provide a service valuable enough to gather continual revenue from investors or subsidies to exist... or they have to have a plausible promise of becoming profitable. Easy money really lowers the bar on how plausible that promise needs to be.

Ripping up on that E brake by hiking interest rates has a twofold effect: first it raises back the bar on how useful a service or profitable a company is or aims to be for investors. Secondly it has an overall effect on the economy, including profitable companies with strong investments since all loans are subject to the interest rates. So while that can produce the intended deflationary effect, the whole economy has to recalibrate.

And that's where things tend to feel like they're going to shit.

Race to the bottom.

Too many reasons to list so I’ll add another

Stocks are only ever allowed to go up, if they go down you risk death

Covid caused massive increase in some stocks, now those companies need to find new ways to create revenue from the base they had prior to Covid to out match the base they had during it

Some companies had drop in stocks during Covid, they need to make it up to their shareholders so they don’t lose confidence

Planet Money has a lot of good podcasts about this.

If you’re curious about the problems that surrounded low interest rates, this is a good one.

https://www.npr.org/2023/04/14/1170103587/interest-rates-mortgage-summers-blanchard

We are living in an universe with multiple possibilities.

We are the most powerful and capable animal on known universe. We set the rules. Considering we treat others animals with cruelty, forced labour, enslavement and mass murdering, we definitly rule with power abuse. Then, elites are doing to us just same we do with less capable living beings.

Justice is important, not?

pay out investors from money that other investors gave them

But nobody would base a serous business on such a premise, would they? This sound like a ponzi scheme!

Your post is obviously mainly about interest rates, which wasn't clear from the headline. Why do you think higher interest rates equal "everything going to shit"?

I'll keep it short : Greed

DRS GME

Because you're online way too much

There was a global supply chain shortage due to COVID. This meant that the demand for everything backed-up. This was compounded by people having more time at home and potentially more money to repurpose from services to goods, so the shift also drove up demand. When there is more demand for goods than the amount available, the cost of goods sold goes way up until you reach a threshold where people are forced to buy less or go broke. This is the elasticity of demand. Their is a point where certain goods are no longer appealing in price or affordable in general. It’s really bad when these are mandatory commodities like food.

This runaway inflation is always dealt with in the same way. The central bank raises interest rates for their notes/loans that they make with the banks across the country. This makes consumer and business loan interest rates rise, which makes them less appealing and also staves free cash flow, so people have less money to spend from loans, but potentially their salaries might be affected as well. This has the benefit of forcefully lowering demand. Whenever demand goes down, the cost of goods will start to go down. During the lull of demand, the supply chain can catch up as well. This is not the first time interest rates were raised to fix runaway inflation. Over time, interest rates will go back down again. It is cyclical.

One difference though is that the government is also in a cycle of under-regulating and over-regulating business. At the moment, we were promised more monopoly-busting and cracking-down on driving up prices in a collusive manner to fight the fed’s deflationary tactics and attempt to make windfall profits. Meaning, whole industries are not supposed to band together behind closed doors and agree to not lower their prices. That is called collusion and is supposed to be illegal. As long as that keeps happening, interest rates will keep getting hiked. The current administration seems to have more of a tolerance for this than they should. If things are going to shit, it’s due to this type of corporate cronyism with the government.

Additionally, you have outside actors like China who are buying up land and businesses and contributing to the turmoil in clever ways like making housing and food less affordable.

Source: Am MBA.

What do you mean by “everything?”

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???

There's a bit of this, but it's not the main way everything ever worked.

The hiking interest was to combat inflation by discouraging people from borrowing and spending, but the reduction in spending can also push some companies out of business and start a recession. The economy isn't booming but we don't have a global recession yet either, so I'm not sure I'd even say they're "going to shit" at the moment.