How Low Interest Rates Brought Lame Ducks to Power

The United States is now ruled by an oil tycoon.real estate, seconded by a tech giant. Real estate and tech... Think about it for a minute... Which economic sectors were at the origin of the two biggest stock market fiascos of the 21st century? And which sectors benefited most from the Fed's very accommodative monetary policy to curb these two systemic crises?

When interest rates are low, mortgages become more accessible, increasing demand for home purchases. This allows buyers to access more expensive properties, driving up real estate prices. Developers are then incentivized to invest in new projects thanks to lower financing costs. This dynamic creates a cycle where demand increases supply, stimulating economic growth and attracting new investors.

Technology companies also benefit from low interest rates, making it easier to access debt to finance their research and development projects, as well as their acquisitions. This attracts many investors who see long-term growth opportunities. This influx of cash supports their expansion and drives up their stock market value, strengthening the position of the industry giants.

Since the 2008 financial crisis, the real estate and technology sectors have undergone a significant transformation, propelled by a policy of historically low interest rates. This period acted as a catalyst, allowing companies in these sectors to recover, refinance their debt, invest in new technologies, and strengthen impressively. They have transformed themselves into true economic powerhouses, their power intrinsically linked to the longevity of low interest rates post-2008. This revival has allowed them to recover from past crises and regain competitiveness that seemed lost.

In this context of easy money, figures such as Donald Trump and Elon Musk have been able to stand out and rise above the crowd. Their success perfectly illustrates how a favorable financing environment can propel entrepreneurs to unexpected heights. Donald Trump was able to take advantage of the reduced cost of borrowing to scale up his real estate projects and refinance his debts. Elon Musk used these favorable conditions to raise the funds needed for his ambitious projects. Low interest rates have allowed Tesla to issue low-cost bonds, supporting his rapid expansion into the electric car sector, despite certain profitability problems. This has encouraged investors to support Musk's futuristic visions, thus increasing his personal value and that of his companies.

However, while their businesses thrived in a low-interest-rate environment, the health crisis called into question the stability of their business models. The Fed, faced with inflationary pressures, was forced to raise interest rates. This decision had a direct impact on borrowing costs, making it difficult to finance large-scale projects. The rapid shift to a higher-rate environment reduced the attractiveness of high-risk investments, thus weakening startups and challenging the valuations of technology companies, which had previously thrived under accommodative rates.

While tech and real estate giants were bolstered by years of prosperity, they found themselves trapped in a business model dependent on favorable financing conditions. Faced with financial uncertainty, these leaders joined forces to climb out of the hole they had dug themselves. Their goal: to seize power and ensure policies that fostered their growth. Trump, with his populist approach, was able to capitalize on voters' resentment over soaring prices, promising solutions that would revive the economy.

This alliance then represents a way for tech companies to strengthen their influence over the country's economic policy, ensuring that their interests and visions for the future of the American economy are not only heard, but also integrated into government decisions. However, the main concern of American citizens, particularly the MAGA base, is rising prices. This could be exacerbated by the policies pursued by the tech giants.

Low interest rates since 2008 have acted as a catalyst, allowing struggling companies and their leaders to reach the highest echelons of power. By facilitating access to credit, low interest rates have encouraged companies with limited potential to refinance their debts and make strategic investments. This has given rise to a new generation of leaders who, armed with previously inaccessible financing, have leveraged their new position to influence the economy and politics at an unprecedented level.

This transformation is not without its challenges, as it has paved the way for individuals with sometimes controversial backgrounds and motivations, but who have managed to navigate this climate of easy credit. The shift from an economy based on excellence to one where survival takes precedence over quality illustrates this reality well. These monetary conditions have redefined the business and even political landscape, elevating players who, without this support, would likely have remained in the shadows. They have created an ecosystem where intelligence and morality can be relegated to the background in favor of immediate profitability.

Tech oligarchs now present themselves as champions of government efficiency, even though they themselves have benefited for decades from an influx of easy capital, taking advantage of a low-interest-rate environment that not only shaped their fortunes but also fueled their ambitions. Even a little too much.