I'm

 

gonna go no.

No they can't.

Can Zombie Firms Survive Rising Interest Rates?

and there's a bunch of them just waiting to fail completely...

"Economists have been warning for years about the rising number of “zombie firms” — companies that don’t generate enough cash to pay the interest on their debts. Companies that can’t pay their debts are supposed to turn things around, restructure, or go out of business. But zombies just keep staggering along, tenuously alive, and some researchers worry that they act as a drag on the entire economy by using up resources that could be better spent elsewhere." 

(Count on it they are)

"With economic conditions changing rapidly, however, these firms might start dying off. Zombies feast on cheap credit, and rising interest rates mean that’s suddenly in short supply. “Some say [zombies’] time is running short,” Bloomberg News reported in May. “The end result could be a prolonged stretch of bankruptcies unlike any in recent memory.”  

(We see that a lot these days..."Confluence of calamities", "series of shocks to"...

Insert whatever system you want to these days...

Financial, Agriculture, Finance, Military, Geopolitical, Social, Economic

and then add: "unlike any in recent memory." at the end.)

"The risk from that scenario is not a massive one-time shock like the financial crisis of 2008. It’s a slow-rolling wave of bankruptcies and restructurings dragging on for years as debts come due." 

"What was behind their proliferation? In 2018, economists at the Bank for International Settlements, a cooperative of central banks, provided an answer. They linked low interest rates to the rising number of zombie firms. The countries where rates dropped farthest were the ones where the share of zombie firms increased the most. And they found that the industries with the highest percentage of zombies were natural resources like coal and metals, followed by pharmaceuticals."

(Thats all that "liquitity" as they call it finding someplace to go. If there wasn't "cheap $" as in easy to secure loans with 0% or even negative% interest rates? (After adjusting for inflation yes, they were negative at times off and on) These zombie firms simply wouldn't be in existence if it wasnt for the low interest rates.. These are the "bubbles" that the Fed has created with it's own loose monetary policy. And when an artificially created bubble pops? It causes way more pain than one that wasn't artificially created does and thats where were at. Bubbles gonna start poppin. Housing market was first and it's already on its way there, there will be plenty more to follow shortly.)

"What’s the upshot, then? 

Zombie firms are real, and common. One paper found 15% of publicly listed companies across the OECD met the criteria for zombie status in 2017." 

"That figure has likely risen, in at least some parts of the world, since 2000, likely driven by consistently declining interest rates."

"Zombies are more common in countries where companies mostly borrow from banks, rather than issuing bonds."

"Today’s rising interest rates and cooling economy are about to put the various theories of zombie firms to the test. Many of the conditions that researchers contend fueled the zombies’ rise are coming to an end, and some analysts think lots of zombie firms will meet their end soon, too."

Yup...chickens coming home to roost on a lot of fronts :-).

(Yup.)

"Can Zombies Survive Higher Interest Rates?

"The current economy is bad news for zombie firms. Higher interest rates put pressure on them, for a few reasons:  

"Higher interest rates lower demand in the economy, meaning less revenue for many companies, which in turn means even less cash to pay down debt."

"They make raising new funding more challenging, as firms that couldn’t cover their interest payments at lower rates will fall even farther behind if they borrow at higher ones."  

"As interest rates rise, investors and banks have less interest in lending to zombies, because higher rates mean they have better, safer options."

"As such, rising rates will likely push more zombie firms into bankruptcy, says Noel Hebert, an analyst at Bloomberg Intelligence. And it will push more healthy firms toward zombie status: Companies that could cover their interest payments may no longer be able to if they have to borrow at higher rates."

(So as current zombie corporations will go into bankruptcy with higher interest rates? Newer ones will be created as companies who could once just barely cover their interest payments are now not going to be able to do so as they have to borrow at higher rates.

This goes to my argument that the financial crisis and Covid were the first two woes. One set up the other. One led to lower interest rates for over a decade, which higher rates now are just not going to fix, (left us no wiggle room from the financial crisis) not if 50% of inflation is because of loose Fed policy and 33% of it (inflation) is in shocks to the food and energy sectors, not to mention everything else going on in the world  currently geopolitically.)

"There’s also the possibility that interest rates won’t go that high, and that central banks succeed in engineering a “soft landing,” taming inflation without a recession."

("Translation:

Lets all count on that because it is the last hope any of us have."

Lets see...trust the central bakers who have been lying to us all for a long time now?

Or trust Christ?

I know who I am going with...yup.)

"The Productivity Puzzle

Research into zombie firms tends to imply that higher interest rates will mean fewer zombies, and that fewer zombies will mean higher productivity growth. If struggling, unproductive firms are forced out of the market, the theory goes, the long-term economic picture will brighten."

(It's coming.)

 "The ultimate drivers of an economy’s potential are more basic: struggling firms should try to turn themselves around, 

healthy firms should innovate and try to out-compete their rivals, 

and investors should do the due diligence necessary to tell the difference. 

An economy’s share of zombie firms depends just as much on all those daily business decisions as on the choices of central banks."

(Sounds great, sounds like a lot of pie in the sky too :-).

"struggling firms should try to turn themselves around"

(Why would zombie firms try and turn themselves around when it was just easier to borrow more$?)

"healthy firms should innovate and try to out-compete their rivals"

(They don't, they get to a certain status and all they do is rip their customers off till the next big thing comes along and does the same. "innovate and try to out-compete their rivals" Where are those firms at exactly?)

"investors should do the due diligence necessary to tell the difference."

They're to lazy to care. 

Just keep the perpetual growth machine goin fellas...

Perpetual growth was a myth to start with...

I love you baby :-).