Here’s an excerpt from an interesting article I read on Bloomberg today. It explains how the Fed’s recent stimulus is fuelling inequality amongst American corporations (as various forms of stimulus before it have for wealth distribution in society).
Put simply, mega cap companies including the likes of Amazon and Visa (cited in the article) are able to borrow at record low rates via the bond market, whereas smaller corporations are left looking to the banks – who are increasingly unwilling to lend.
“The Fed actions have moved issuers that are big enough in front of the velvet rope, and those that aren’t stay outside,” said Peter Atwater, founder of research firm Financial Insyghts and an adjunct lecturer of economics at university William & Mary. “Capital markets access has become a determiner of life or death for business.”
Here’s a chart showing the disparity between each source of lending:
What might this mean for markets? Hate it or love it, in a tale as old as time, I believe that it will help ‘the rich’ (mega cap companies) get richer, whilst everyone else gets poorer.
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