An Unintended Consequence of Low Interest Rates? The Big Get Bigger

The Breakdown

Blockworks

Investing, Business

4.8 • 786 Ratings

🗓️ 26 August 2020

⏱️ 16 minutes

🔗️ Recording | iTunes | RSS

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Summary

Today’s episode of The Breakdown is an extended edition of the Brief. NLW discusses: The “COVID-19 vaccine trade” on Wall Street kicks markets higher The latest on TikTok vs. the U.S. and what it means for the U.S.-China relationship More companies move reserves from cash to bitcoin The final topic today looks at news that some large money market funds are shifting fees from users and taking the financial hit themselves. This creates a dynamic where only the largest companies can survive long term, and reflects a key unintended consequence of low interest rates.

Transcript

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0:00.0	When interest rates go to zero, one of the unintended consequences is that the firms that are so
0:06.9	large that they can shoulder the burden for a little while tend to beat out smaller firms.
0:13.3	That is inherently anti-competitive, and it creates another dynamic by which capital and power
0:20.0	is concentrated in an ever-shinking
0:22.3	number of hands.
0:24.0	This isn't how a capitalist economy is supposed to work.
0:28.4	Artificially low rates have the net impact of driving out competition.
0:34.7	And that's something that we really need to consider, alongside all the other critiques
0:38.9	of current monetary thinking.
0:41.6	Welcome back to The Breakdown with me, NLW.
0:45.8	It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world.
0:51.6	The breakdown is sponsored by Crypto.com, Bitstamp, and nexo.io, and produced and
0:57.4	distributed by CoinDesk. What's going on, guys? It is Tuesday, August 25th, and today we are doing
1:06.8	one of our extended versions of the brief. I don't have a full analysis today. Instead,
1:13.1	I'm going to go just a little bit deeper on a few topics that I think are really, really
1:18.0	important in the larger context of the economy right now. So let's dive into this extended
1:25.0	edition of the brief. First on the brief today, the COVID-19 vaccine trade is in full swing.
1:32.8	So what happened?
1:34.2	Yesterday, the Wall Street Journal had a headline that said global stocks rally on potential
1:39.6	coronavirus treatment.
1:41.7	And basically what happened is that the FDA made an emergency use approval of
1:46.7	convalescent plasma, which, according to the Wall Street Journal, quote, increased appetite
	...

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