Comment by bubbleRefuge
7 months ago
There is no proof that higher interest rates lead to greater unemployment. In fact, macro employment kind of boomed during the referenced period. I'd posit that higher rates actually boosted macro employment stats . Why ? Because higher rates = higher income to rich people via interest income channel = higher fed budget deficits ( gov is net payer of interest) = higher GDP = lower unemployment ceterus paribus.
This is completely backwards. When interest rates are high, the expected returns of equity investments have to be even higher to justify the risk over risk-free fixed income assets.
And that's only the indirect effect on equity funding; debt funding just directly becomes more expensive.