The Life-Changing Effects of Higher Rates (Seriously)

Andy Snyder|February 13, 2023

We live in a shallow world… and yet so many are drowning.

There are few incentives to do the deep mental calculus it takes to determine what will happen if something goes wrong.

This shortcoming of our society might kill you… literally.

Take interest rates, for instance. It’s been widely reported that they’re on the rise and that money is getting tight. Everybody knows it.

Most folks consider the first-line effects… or at least they get them from the headlines.

Credit card rates are rising. The cost of a mortgage has soared. CD rates no longer start with a decimal (cause for celebration for some folks).

But what about the effects caused by the effects… like a disease not getting cured because a company couldn’t get funding for its research?

What about the technology that gets pushed back decades when the team in charge of it gets laid off because rent went up?

If you don’t think bad monetary decisions lead to history-altering consequences… think again.

It’s not just money on the line. It’s life.

Deadly Medicine

According to the folks at The Wall Street Journal brave enough to dig into such things, last year nearly 7,400 jobs were cut in the pharmaceutical industry. The number is already rising quickly this year, with 19 drug companies announcing layoff plans in just the first month of 2023.

Some of that, of course, comes not because of rate hikes but because of the president forcing these firms to negotiate with Medicare. Lives will certainly be lost.

But many biotechs are slashing research budgets or even closing up shop because they can’t get the cash they need to survive.

Finch Therapeutics (FNCH) is a tiny company that has made big headlines in the sector in recent weeks. Its work in the quickly emerging field of microbiomes is worth watching. Shares sold for more than $16 each as recently as late 2021. Today, you can get them for less than $0.50… if you dare.

The company just laid off 95% of its staff and will likely shut down for good in May.

It couldn’t find the funding it needed to survive. The risk-reward equation isn’t what it used to be for investors.

And Finch is not alone.

On February 8, Aligos Therapeutics (ALGS) announced a 10% cut to its headcount. Over the last year, it’s fired 25% of its staff.

On February 6, Magenta Therapeutics (MGTA) cut 84% of its staff. The same day, privately held Neurona Therapeutics – which focuses on chronic brain diseases – cut 25% of its workforce.

The list goes on. Name a disease… and research on it has almost certainly been cut.

Small biotechs go out of business all the time, of course. It’s risky business. But it’s downright dangerous when rates are surging higher.

Which one of those companies could have someday saved our life?

It’s more proof – as if we need it – that bad decisions have monumental consequences.

This inflation mess and the economic upheaval of the last 36 months started with a panicked “two-week shutdown” and an ignorant bout of money printing.

We’ll be paying for it for generations.

It may even cost us our lives.