Cheap Money Does Not Mean An Abundance Of Money
We have many discussing the idea of low interest rates equates to cheap money. This is certainly true. However, this does not mean there is access to this money.
In this video, I discuss why people's belief of cheap money on the economy is misguided. They are not accounting for the fact that a large segment of the business community does not have access to the money.
▶️ 3Speak
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the truth is that we say that cheap money is not very accessible to everyone. Now, once that money can be obtained, how do you think it will be used and if it has an interest rate?
Bank lending, at least in the United States, is flat. That means we are dealing with a shortage in the USD which is reflected in a lot of the metrics.
For this reason, I think we have to look to cryptocurrency to solve a lot of these issues. How it will be used? Hopefully to generate wealth by investing in projects and not just playing the games we saw over the last few years.
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The helicopter money was never really meant to solve the issue but to give the system more time to solve the issues. It's too bad people don't realize that and we can't expect it to always be there. Small businesses were crushed and I don't really think they will be coming back because I heard plenty of stories about people using up their savings and still shutting down.
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Small businesses are wiped out for the foreseeable future, at least how we knew them.
We could be seeing a difference though with the online world. After all, we are now each our own business in cryptocurrency.
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Summary:
In this video, the speaker discusses the misconception that the Federal Reserve keeping interest rates low leads to cheap money, which in turn causes inflation, over-leveraging, and other issues. He argues that despite low interest rates in the US, EU, and Japan, economic growth has been subpar, especially impacting small businesses. The speaker emphasizes the significance of access to credit for small businesses, pointing out that while larger corporations can raise money through bonds, small businesses rely on bank lending. He highlights the challenges small businesses face in accessing capital due to stricter lending standards and the shift towards bond financing. The speaker concludes that the idea of cheap money benefiting everyone is misleading, as access to credit remains a critical issue for businesses.
Detailed Analysis:
The speaker begins by addressing the common belief that low interest rates set by the Fed result in cheap money, leading to inflation and over-leveraging. He challenges this notion by pointing out that despite low interest rates in the US, EU, and Japan, economic growth has been lackluster over the last decade. He highlights the impact of cheap money on small businesses, noting that bank lending in the US has remained flat since the financial crisis, affecting individuals and smaller companies.
The discussion delves into the struggles faced by small businesses, which account for a significant portion of job growth in the US. The speaker emphasizes that while smaller companies have historically competed against larger corporations, recent challenges have been exacerbated by a lack of access to capital. Unlike major corporations and governments that can raise funds through bonds, small businesses heavily rely on bank loans, which have become harder to secure due to economic uncertainties.
Furthermore, the speaker sheds light on the dynamics of the bond market, where larger entities gravitate towards higher returns, leaving small businesses in a tough spot. As economic headwinds and market shifts occur, banks become cautious about lending to smaller enterprises, fearing potential defaults. The speaker underscores the contrast between bank loans and bonds in terms of liquidity and risk, explaining how small businesses struggle to meet stringent lending criteria and high costs associated with bank loans.
In conclusion, the speaker emphasizes the crucial role of access to credit for the sustainability and growth of small businesses. He warns against oversimplifying complex economic factors and highlights the disparities in capital access between large corporations and smaller entities. The video serves to challenge common misconceptions about the impact of low interest rates and cheap money, underscoring the challenges faced by small businesses in the current financial landscape.