It is Halloween and so it is fitting that we reflect on the zombie companies that ambulate among us because the Federal Reserve (and other central bankers) continues to inject them with regular doses of interest free money (ZIRP), which makes them appear to be alive.
“Zombie company” is a media term for a company that needs constant bailouts in order to operate, or an indebted company that is able to repay the interest on its debts but not reduce its debts. There are several types of zombie companies. The term regained popularity in the media during 2008 for companies receiving bailouts from the U.S. Troubled Asset Relief Program (TARP). A 2002 New York Times article about Japanese companies kept on “life-support” with loans include a headline that stated, “They’re Alive! They’re Alive! Not!; Japan Hesitates to Put an End to Its ‘Zombie’ Businesses.”
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