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Joined 1 year ago
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Cake day: July 24th, 2023

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  • And it’s most costly to increase interest rates not because those directly affect the investors, but because those interest rates affect the borrowers since the borrowers will need to make more and more money to be able to pay back the initial injection + interest.

    If borrowers don’t think they can pay back, then they probably won’t borrow in the first place. If they do borrow but don’t make enough to pay back those loans + interest, then the investor loses out.

    And if borrowers don’t borrow in the first place, then investors sit on their money when they could theoretically inject it into other businesses so they can earn on what they own, and not just let their assets stagnate (or decay). To investors, this might also be perceived as a loss.

    Do I have that right?