Given the recent ability of companies to refinance debt at record low rates the amount of zombie companies have never been higher. According to research by Deutsche Bank, 19% of American companies and 15% of German companies are zombies. Pre-pandemic nearly 40% of listed companies in the US (and 38% of Russell 2000) lost money over the past twelve months.
With the Fed and ECB extending purchases to corporate bonds (both investment grade and junk), any company that has enough corporate debt outstanding or employs enough people to swing an election are too big to fail along with banks who earned that title during the GFC.
There are many systemic consequences to this including:
- Lower productivity due to labor being used in less efficient manager
- Oversupply of goods at unprofitable prices
- Increasingly dangerous level of corporate leverage
- Economy too fragile to ever raise real interest rates
- and many others mentioned in the video…
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