Elon Musk and Sam Bankman-Fried can blame themselves for their companies’ predicaments but they are part of a bigger issue, writes Stephen Bartholomeusz
, Microsoft “less than one per cent” of its employees and Apple is freezing hiring of new employees in a reversal of two decades of growth trajectories.Big tech had a good pandemic as lockdowns, the shift to working from home and a big increase in consumer cash balances thanks to governments’ “relief” and stimulus spending sparked a tech-biased investment and spending spree.
Its “quantitative easing” – purchases of bonds and mortgages – was left in place for nearly a decade before it started to shrink a balance sheet that had swollen from about $US900 billion pre-crisis to about $US4.5 trillion in 2018. The other major central banks – and some, like the Reserve Bank, not as major – all did similar things. Tens of trillions of near-costless dollars were pumped into the global financial system and had to find somewhere to go. In real terms, for much of the past decade, investors have been paid, or at least subsidised by the central banks, to take risk.
Between late 2019 and late last year the overall US sharemarket rose about 53 per cent. The tech-heavy Nasdaq market rose 88 per cent over the same period and the NYFANG index rose a staggering 170 per cent. Interest rates started rising. Two-year US Treasuries now yield 4.3 per cent and 10-year bonds – the benchmark for company valuations – 3.9 per cent, having been above 4 per cent in the past week.
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