End of Easy Credit May Mean Slow Death for Zombie Firms

The video discusses the concept of zombie companies, which have survived due to easy access to credit during the era of quantitative easing and low interest rates. With the Federal Reserve and other central banks now focusing on fighting inflation, the era of easy money is ending. This shift is expected to put pressure on zombie companies, which are defined as firms that do not earn enough to cover their interest expenses. While a wave of bankruptcies and defaults is anticipated, it may not happen immediately due to the liquidity these companies acquired in 2020 and 2021. The video also highlights the economic impact of zombie companies, which can hinder growth by using capital for interest payments instead of productive investments.

What factors contributed to the rise of zombie companies during the era of easy money?

What is the technical definition of a zombie company?

What are the potential consequences for zombie companies as interest rates rise?

How did the liquidity provided in 2020 and 2021 affect the longevity of zombie companies?

What are the implications of a wave of bankruptcies among zombie companies for the economy?