From Hazlitt [The Inflation Crisis and How to Resolve It] on the Weimar Republic:
Companies paid very low dividends. According to one compilation, 120 typical companies in 1922 paid out dividends equal, on the average, to only one-quarter of one percent of the prices of the shares. The nominal profits of the companies were frequently high, but there seemed no point in holding them for distribution because they would lose so much of their purchasing power in the period between the time they were earned and the day the stockholder
got them. They were therefore ploughed back into the business. But people desperately wanted a return, and they could make short-term loans at huge nominal rates of interest. (High interest rates also meant low capitalized values.)
My question is, what does that last sentence mean? In particular, what does capitalized values mean?
It’s a finance term…when you talk about “capitalizing” something, you’re generally talking about manipulating the cost/price you’re looking at so that it reflects the true value in terms of whatever angle you’re looking from…
So for example, when you’re talking about a company as a whole, you might multiply the outstanding shares by the market share price. This is called “market capitalization”. In this instance however, (and usually when you hear “capitalization”) it generally means discounting a future set of cashflow(s) to a present value.
Hazlitt is basically talking about the inverse relationship between interest rates and bond valuations…
By the same inverse relationship, high interest rates mean lower capitalized values (i.e. bond prices)