from Hacker News

We Are Seeing Some of the Highest Layoffs in Tech History

by ppjim on 1/25/23, 9:23 PM with 1 comments

• by kokojumbo on 1/25/23, 9:45 PM

  It's normal 101 of basic classic (non Keynesian nonsense) economics. So many tech companies were kept alive thanks to very cheap credit (loans) as they were barely breaking even or declaring negative income for years. High interest rates are obviously dealing serious financial blows to such companies. All that already existing debt is now much more expensive and getting new is not cheap either. So you must cut expenses – which might mean getting rid of most expensive projects that bring no income or even generate loses. That causes layoffs. If there was not so many years of zero or in case of some countries even negative interest rates all these projects would never been financed by debt or possibly even started.

  Inflation (expansion of so called money supply by means of bank loans – especially in fractional reserve system – plus on top of that central bank money printing to finance governmental debt and deficit spending) additionally causes prices to rise as unit of currency is losing it's purchasing power as a result of monetary supply expansion. So costs of stuff like electricity and new electronic components are rising as much more money than before is arriving to compete for purchasing of same amount of products. Also prices of components all that electronics and electricity is being made of are undergoing same process. That's a sequential chain of price increases that stretches in time many months after money supplied been extended.

  Of course employee that work for all these companies seeing rising costs of living start demanding rises which adds additional fiscal pressure on companies.

  The result is obvious - layoffs. That's the cost of high inflation and years of low interest rates. Rising interest rates start to unwind years if not decades of capital misallocation caused by reckless monetary policies of central banks/governments fearing deflation because deflation would mean they cannot pay governmental debts that they can pay in inflationary environments using purchasing power of own currencies (which means paying with purchasing power of savings of citizens).