US cash infusions led to the rise of zombie companies – RT’s Keiser Report
As the US government pumped trillions of dollars into the economy in an attempt to mitigate the impact of Covid-19, the government aid is turning more and more firms into “zombies,” RT’s Keiser Report found out.
While some of the loans under the Paycheck Protection Program (PPP), enabled by the Fed’s loose monetary policy, have been fraudulently appropriated, there are signs that the funds also reached some smaller companies, Stacy Herbert noted in the latest episode of the Keiser Report. However, it is possible that those companies will not be able to function without those cash injections, according to Max Keiser.
“These small and medium sized companies are now becoming zombie companies,” Keiser said. “It’s a huge problem in the S&P 500, in the banking industry. They live on bailouts and in fact they don’t have a viable underlying business. So they’re taking that busted model and they’re applying it to small and medium size enterprises.”
He added that this means every dry cleaner and food shop could be living on PPP loans coming from the government, while the US money-printing turned the country into “the nation of zombies.”
Despite a decreasing number of commercial bankruptcies under Chapter 13 due to PPP payments, over 400,000 small businesses still opted to shut down as they could not cope with the coronavirus crisis.
“These are people that chose to just close their business and not apply for these PPP loans or maybe they didn’t get one of these PPP loans, because, remember, JPMorgan and the big banks got most of the money to give to their favorite customers,” Stacy Herbert said.
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