02 June 2022

"Zombie corporations" explained

"They are creations of easy credit, beneficiaries of central bank largesse. And now that the era of unconventional monetary policy is over, they’re facing a challenge like never before. 

They are America’s corporate zombies, companies that aren’t earning enough to cover their interest expenses, let alone turn a profit. From meme-stock favorite AMC Entertainment Holdings Inc. to household names such as American Airlines Group Inc. and Carnival Corp., their ranks have swelled in recent years, comprising roughly a fifth of the country’s 3,000 largest publicly-traded companies and accounting for about $900 billion of debt.

Now, some say, their time may be running short.

Firms that could once count on virtually unfettered access to the bond and loan markets to stay afloat are being turned away as investors girding for a recession close the spigot to all but the most creditworthy issuers. The fortunate few that can still find willing lenders face significantly higher borrowing costs as the Federal Reserve raises interest rates to tame inflation of more than 8%. With surging input costs poised to eat away at earnings, it’s left a broad swath of corporate America with little margin for error.

The end result could be a prolonged stretch of bankruptcies unlike any in recent memory."


  1. I read articles on finance and the economy constantly and I don't know jack. Except one thing...or two: This is not an honest economy. And, the fragility of the system seems to be increasing, with ever more wobble in the wheel. Oh, one more thing: I've long wondered at the extent to which economics and environmental science remain isolated, one from the other. I can't but think this is a kind of denial on as massive a scale as is humanly possible.

  2. The end result could be a prolonged stretch of bankruptcies unlike any in recent memory.

    Good. Let them go bankrupt just like millions of home owners did a decade ago. No weird chapter 666 bankruptcies that just screws employees and enriches the money vampires even more. Liquidate their assets and shame management so they never get a job again. And may the various legal authorities go through their books with a fine tooth comb looking for fraud and toss those responsible in jail.

    These companies forgot that business is about selling a good product for an honest price and went all in on making money of financial constructions.

    Zero mercy from my part.

    the fragility of the system seems to be increasing

    This is because pro-"free market" politicians have worked very hard removing all the safeguards in the economy. May they be all voted out when their lobby money dries up.

    1. This is what's known as a "predicament." Financial collapse might punish some of those predators you rightly despise, but most of the pain is always felt on the bottom rung of the economic latter. So, damned if it collapses and damned if it doesn't. The Reaganomics card house (built by both US parties) is well aligned with what we would expect to see in a collapsing civilization, in the context of a collapsing biosphere. Collapse will only cure the system by way of horrors we might wish to postpone, to include possible extinction; that is, where the economic and ecological intersect. Predicament.

  3. "This is not an honest economy"

    Somewhere between the money laundry and the shell game the pea ran off with the loot.


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