Comment by roenxi
11 days ago
> Maybe, but 0% interest should have make it easy to invest in capital intensive endeavors that would have turned into great protective moats when the interest rates inevitably bumped up.
It doesn't - if you look at the situation in real terms, the amount of resources available to invest is about the same (probably shrinking because some are diverted to people who aren't creditworthy and consume them). So the major effect of artificially low interest rates is to add a whole heap of artificially supported highly wasteful companies to the mix.
All that changes is the market started rewarding people with access to credit instead of people who were responsible and effective. The credit people aren't particularly capable and it'd be better if they had been forced out.
China invested their low interest fiscal capacity into developing over decades via coordinated policy of their central bank / industrial strategy nudges to their businesses. China's factory ecosystem and the ability to build stuff meets my definition of a protective moat. Its very hard to replace and one can only contemplate it over relatively long time frames.
US businesses were free to do the same over the past low interest environment, but we did not have the same incentives, not inclinations in terms of prevailing business strategic appetite for factories. In contrast, for big tech, there was interest and appetite for it and significant capability with protective moats were built - but one could argue that software based tech moats may be faster to bypass.