From Cheap Money to Bankruptcies | Weekly Business Briefs w/ Martin Perdomo

Is the era of cheap money finally over? Discover how a minor shift in the unemployment rate could set off a chain reaction, prompting the Federal Reserve to raise interest rates and what that means for your loans and mortgages. We discuss the Fed’s tightrope walk as they handle rising inflation and the implications of potential policy changes on both consumers and businesses. Other economic indicators suggest weaknesses in the labor market, adding another layer of complexity to the Fed's balancing act.

Amidst this economic uncertainty, we turn our focus to the alarming surge in bankruptcy rates in 2023. We break down how high interest rates have driven many companies, including notable names like Silicon Valley Bank and Bed Bath & Beyond, to file for bankruptcy. Lastly, we navigate the political landscape with a spotlight on President Biden’s decision to run for re-election and the potential rise of Vice President Kamala Harris. Could she be the Democratic Party's future leader, or will other heavyweight contenders emerge? Tune in for an in-depth discussion on these pressing issues.

Transcript

Speaker 1: 0:02

Today is July 10th, 2024, and here are the top three headlines in this week's weekly business brief how a tiny unemployment shift could rock the economy. The US unemployment rate is currently 3.6 percent, and a slight drop of just 0.1 percent could force the Federal Reserve to take significant action to control inflation. Take significant action to control inflation. The Fed aims to keep inflation around 2%, but it's been running higher, which raises concern about the economy ever heating if unemployment gets too low. This scenario would likely lead to the Fed to raise interest rates, making loans and mortgages more expensive, impacting consumers and businesses alike. The Fed is facing a delicate balancing act. While low unemployment is generally a positive thing, it can drive up wages and prices, exacerbating inflation. Other economic indicators, such as the decline in manufacturing and decreasing job openings, suggest potential weakness in the labor market. If the Fed acts to curb inflation by raising interest rates, it risks slowing down economic growth, presenting a complex challenge in maintaining economic stability.

Speaker 1: 1:11

Next up, bankruptcy rates soared to record highs. A lot of companies are going bankrupt or went bankrupt in 2023 at a rate we haven't seen in over a decade. This surge is driven by high interest rates, which makes borrowing more expensive. The Federal Reserve raised interest rates significantly to combat inflation and is putting a lot of financial pressures on businesses. Some big names like Silicon Valley, bank, bed, bath Beyond and Lord Sound Motors have already gone under. In the first half of the year, nearly 3,000 firms filed for bankruptcy, a 68% increase from last year. This is higher than during the early pandemic months of 2020. Industries hit the hardest include consumer goods industrials and healthcare. Industrials and healthcare companies are struggling with increased costs due to ongoing global economic issues like supply chain disruptions and the war in ukraine. Overall, this trend highlights that the era of easy, cheap money is over and many businesses are finding it tough to survive in this new economic climate. Well, this was like the drug for business owners and consumers all alike, where we were all borrowing money for cheap. And now we're we we're getting weaned off this cheap money era and we all have the chills and the scratchies and we have all of the withdrawal symptoms that you get when you're weaning off of some of a drug, when you're addicted to something so cheap money is like a drug and it's a drug addiction and a lot of businesses scaled. Addicted to something so cheap money is like a drug and it's a drug addiction and a lot of businesses scaled and grew and grew with cheap money because it was so cheap to borrow money. It was so cheap to borrow on assets, and now that money is not that cheap, we're paying the price for it.

Speaker 1: 2:57

And this week on Biden Watch, it looks like President Biden is not stepping aside in the 2024 presidential elections. Despite concerns about his age and caution, the Democrats to consider passing the torch, biden remains committed to his re-election campaign. He believes his experience and policies he has implemented so far position him as the best candidate to lead the country forward. Biden's announcement aims to quash any speculation about potential challengers within his parties and solidify his standing as a Democratic frontrunner. If, however, biden were to change his mind and decide not to run, Vice President Kamala Harris is seen as the most likely candidate to replace him. Harris, who has been an active and visible partner in Biden's administration, has garnered significant support within the Democratic Party. Her potential candidacy would likely receive strong backing from key party figures and voters who are eager for continuity and stability. Harris' background and accomplishments, both as vice president and previously as a senator senator, make her a formidable contender in the eyes of many Democrats.

Speaker 1: 4:08

So I've got a lot to say on this one, guys. First of all, can you imagine Kamala Harris being president, the leader of the free world? First of all, she's done nothing. All she did was, in California, was go after hard after minority. She was locking people up for minor drug charges heavy, she had a super heavy hand. She hasn't demonstrated any leadership abilities, in my opinion. So I don't see, I don't see how the article supposes that Kamala Harris is the frontrunner. If anything in the Democratic Party, I think they'll be bringing up Mr Newsom, the governor of California. I think he has a better shot than Kamala Harris. Her popularity was just horrible. She was polling horrible the whole term and now we think she's gonna do a good job. She's not. She's not your leader, guys democrats. She's not your leader. She's not the one. You have a better shot. I think we're most likely see a switch and bait with, if anything, if we see one, it'll be a switch and bait with newsome from california.

Speaker 1: 5:16

He speaks, rob, he has, in my opinion, he has. He doesn't have much he has. He doesn't have much context to him. He doesn't have much to him, but he presents well and he speaks well, and a lot of people that's what they look at when they're, when they're voting. They don't look at actual policies. But when you look at California, that's a horrible choice. If he wins the election, that's a horrible choice for our country, cause there's California with the theft and the crime rate and the homeless problems and they're almost going bankrupt. If that's what he did in California, imagine him running the country. So, anyways, we have a lot of challenges in our political arena right now in the United States. I'm excited to see what's going to happen in the future. The future is bright for this country. I'm super excited. Regardless of whatever way we go, this country will thrive and we will continue to win. And this has been your weekly business brief. I'll see you guys next week. Peace out.