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This confirms what I argued in a recent debate on the role of profitability. The huge profits gained since the end of the Great Recession have been mostly confined to the large companies: “just a few mega companies hold most of the cash while thousands of small and medium enterprises (SMEs) hold little cash and much more debt. Indeed, a minority are really ‘zombie’ firms just raising enough profit to service their debt.”
It is easy to see why there are so many zombies. Despite the relative recovery of headline profitability in many economies in the credit-fuelled boom from 2002 to 2006, many small to medium-sized companies did not see an improvement in profitability. Instead they racked up higher debt through bank loans. The Great Recession caused a collapse in profits and even after 2009, profitability improved little for these companies while debt remained high. But the zombie companies have struggled on because interest rates were so low and banks would not foreclose. This scenario has been found in the extreme in Italy where ‘non-performing’ bank loans have reached 20% of GDP.
full: https://thenextrecession.wordpress.com/2017/01/23/beware-the-zombies/ _________________________________________________________ Full posting guidelines at: http://www.marxmail.org/sub.htm Set your options at: http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
