Should You Be Afraid of Cheap Money?


It has been the best of times, and it has been the worst of times. I’m really not trying to paraphrase Shakespeare here, but the concept is appropriate. We have been through a fairly rough patch in the last several years, with a recession nipping at practically everyone’s heels. In that sense, people who lost their jobs, people who wound up getting jobs but for less pay or fewer hours, and those who found themselves struggling with their household bills have seen the worst of times. On the other side of the mirror, the exceptionally low interest rates which most modern economies have instituted, including the UK, have made it easy for even small businesses to access capital to begin rebooting and expanding. However, in the world of investing, it is leading to some dangerous practices.


Could History Repeat Itself?
The answer is undeniably “yes.” History often repeats itself, and such things as economic cycles go in waves. We have just been through a fairly nasty one, but things are beginning to look up, at least as far as the UK economy is concerned. The trouble is that investors, who could be banks, private institutions, or even individuals, are not finding a lot of places where they can invest their money and get what they would consider a good return. As a result, many are beginning to invest in bonds, stocks, or other financial instruments which have a slightly higher return than a bank deposit but still carry the potential for a high amount of risk.
Taking the Euro Zone as an Example

Thanks to low interest rates and generous allocations of funds by the central banks in the EU, many countries that have been in trouble for the past several years, such as Spain, Greece, Italy, and Portugal, have been able to survive without defaulting on their debts. Given the fact that these economies are practically bankrupt in many cases, it can be considered a small miracle. The problem is, many investors are seeing this trend and are investing in these national debts under the illusion that they are perfectly safe – when, in fact, they should be rated almost as junk. If any of these countries go through an additional rough patch and default for any reason, it will create widespread panic across the international monetary markets.
Taking Advantage of an Opportunity
Things are definitely not so dire here in the UK. While the Bank of England’s rates are at historical lows, large and small companies are borrowing prudently, taking out loans for just the right amount that they need to expand their business and gain a competitive advantage both at home and overseas. This is creating a welcome rise in employment, which is certainly benefiting recruitment agencies. If you have thought about starting a recruitment agency yourself, this would be a perfect time to do so. A company such as Startupsimply can provide you with all the tools you need, including recruitment factoring, so that you can get set up with very little effort and take advantage of the booming job market. This is the perfect opportunity, before interest rates rise and more stringent monetary policies are put in place.
Image attributed to: Serge Bertasius Photography

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