BREAKDOWN: The Decade of the Living Dead – How Zombie Companies Are Robbing Tomorrow’s Economy
CoinDesk Podcast Network
CoinDesk
4.8 • 689 Ratings
🗓️ 15 September 2020
⏱️ 20 minutes
🧾️ Download transcript
Summary
The percentage of companies that can’t afford to pay the interest on their debt has reached a new all-time high in the wake of central bank intervention.
This episode is sponsored by Crypto.com, Bitstamp and Nexo.io.
Today on the Brief:
- MicroStrategy increases its bitcoin reserves by $175 million
- The Oracle-TikTok deal starts to smell fishy
- The SEC is investigating claims of fraud involving Nikola Corp.
Our main discussion: The rise of zombie firms.
A zombie firm is a company that can’t afford to service its debt from operating income. These companies are made possible by artificially low interest rates, and they drain resources from the economy.
On today’s episode, NLW explains:
- Why there are more zombie companies than ever
- The negative impact they have on the economy
- How they could drive a new financial crisis
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Transcript
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| 0:00.0 | In short, banks can't really afford to let these zombie companies fail either because of the |
| 0:05.9 | potential cascade effect. It's not hard to see how with so much of this bad debt on their books, |
| 0:13.7 | a number of defaults all at the same time could trigger that sort of cascade, where all of a sudden |
| 0:19.2 | banks don't have the reserves to cover those losses |
| 0:22.0 | and certainly can't keep loaning out money to good companies. All of a sudden then, |
| 0:27.7 | zombie companies aren't just draining resources by disallowing them to flow where they would be |
| 0:32.1 | more economically productive, but they're actually cutting off the opportunities for those |
| 0:36.8 | other companies that exist as well. |
| 0:40.2 | Welcome back to The Breakdown with me, NLW. |
| 0:44.3 | It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. |
| 0:50.5 | The breakdown is sponsored by crypto.com, BitStamp, and Nexo.io, and produced and distributed by CoinDes. |
| 0:58.2 | What's going on, guys? It is Tuesday, September 15th, and today we are talking about zombie companies and the threat they pose to real growth, the real economy, and the potential for them to be at |
| 1:12.6 | the center of a new financial crisis. First, however, let's do the brief. The brief today is actually |
| 1:19.4 | a number of follow-ups to stories we've been following, so we're going to look at micro-strategy |
| 1:24.5 | upping its Bitcoin allocation, the real deal with the Oracle deal, and fraud |
| 1:29.9 | accusations at Nicola. |
| 1:32.1 | Let's start with Micro Strategy. |
| 1:34.4 | CEO Michael Saylor tweeted this morning on September 14, 2020, Micro Strategy completed its |
| 1:41.2 | acquisition of 16,796 additional bitcoins at an aggregate purchase price of |
| 1:47.4 | 175 million. To date, we have purchased a total of 38,250 Bitcoins at an aggregate purchase |
| 1:55.2 | price of $425 million, inclusive of fees and expenses. So what does this mean? To me, the only way that I think |
| 2:04.5 | you can read this is as an extra doubling down on this strategy of moving cash reserves into Bitcoin. |
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