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???

  • Phantom_Engineer@lemmy.ml
    162·
    1 year ago

    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???

    Few, if any, of the big tech companies were playing out any kind of dividend to investors. It was more that they were content for companies to maybe someday make money as opposed to actually making money,

    • EpicallyFail@sh.itjust.works
      3·
      1 year ago

      That assumes dividends are the way stock players make money, which is, to put it rudely, boomer thinking. The company doesn’t need to pay you a dividend if your stock goes up 30% YOY because of your ‘infinite growth’, you get your money from selling the stock. This is why the markets are so fucked, because the big trading algorithms that drive day to day trading push companies to overextend and in some cases believe the lie that is infinite growth so their short term investors can reap rewards over a few weeks, then move on to the next company, leaving the first one holding the bag for their own actions.

      Doesn’t help when companies that resist this trend suffer from activist investors that use their media influence to say that a long running company is ‘suffering’ when it really is just consistently growing slowly and safely. Pushing for restructures and endless inflation. It’s the 80s all over again, just rebranded.