News & Analysis
Kill These Companies ... but Leave the Banks Alone
'Zombie' companies holding back UK economy, says Ernst & Young ... Britain's recovery is being held back by a wave of "zombie" companies that should be allowed to fail but are instead undermining capitalism, according to Ernst & Young.E&Y said while zombie companies were still operating, they were taking market share from viable companies that should be growing and boosting the economy. The accountant said that the financial crisis had created an environment where it is "too difficult to fail", with businesses being kept afloat to the detriment of the broader economy. As a result, so-called "financially undead" companies are clinging on, despite the recession, making markets and the economy inefficient. "The expected jump in the number of companies falling into administration has not materialised," a report by E&Y said. – UK Telegraph
Dominant Social Theme: These companies should be shut down by the banks.
Free-Market Analysis: Here we go. Main Street needs a culling but not Wall Street.
Or should we be referring to London's City, that infamous patch of ground in London that like Washington DC and the Vatican is its own tiny patch of rules and laws that have nothing to do with its surroundings?
From the City comes the glower of the power elite that seems to control central banking around the world with all its attendant booms and busts. What is most striking about this article, excerpted above, is its determination not to mention banking. We've made the same observations but we've been careful to point out that banking is the world's biggest bubble.
It is the commercial banks and related financial entities that function as the distribution arm of the elites. The amount of such financial entities are a kind of metaphorical rash on the polity. Go to any large city and count the amount of bank headquarters and other financial entities.
These facilities swell through goods times and bad, through ups and downs – always they grow. It is not Main Street that needs to realize the effects of an implosion so much as the financial industry. We are being misled by articles that talk about too-big-to-fail as if it had much to do with industry.
Every time the larger economy implodes, Main Street entities implode with it. The same cannot be said – not fully, anyway – for the financial industry. Mergers takes place; but the status quo remains.
The implosions feast on industry. The past 100-plus years have seen the creation of an increasingly globalist economy driven by monopoly fiat money that regularly and violently subsides. In the 21st century, the implosion has been exceptionally violent and the "recession" feels more and more like a depression.
We've postulated regularly that the world's condition is willful not a coincidence. The elites, frightened by their exposure on the Internet, have seemingly triggered what may eventually become a worldwide depression.
The degree to which it is willful can be debated. But the reality of ruinous central banking – 150 of these creatures now – cannot. Likewise, the infestation of globalist institutions can be observed but not explained away as a coincidence. Here's some more from the article:
Although there have been some high profile business failures during the downturn, including Clinton Cards and Game Group, insolvency rates have been below the historic norm for recessions. Insolvency rates typically peak between 12 and 18 months after the end of a recession.
E&Y said that although companies are struggling, the number of administrations actually fell last year, despite a 42pc rise in profit warnings among listed companies. It said the mismatch could be explained by a change in attitude among the government and creditors, which have allowed more breathing space for businesses since the onset of the crisis.
"[Banks] do not want to be seen to be pulling the financial rug from underneath companies that are facing difficult trading conditions," the accountant said.
Alan Hudson, E&Y head of restructuring in the UK, said while zombie companies were still operating, they were taking market share from viable companies that should be growing and boosting the economy.
"The whole thing grinds along very slowly," he said. "It is a very unsatisfactory environment that has become so during the crisis which began in 2007-08."
The whole thing grinds along slowly because the banks will not be allowed to fail. No matter what, those who run the central banks will not remove their distribution system.
If the top money-men wanted to renew the economy they would provide fiat money directly to consumers instead of retaining the fiction that banks need to supply the funds.
Sure, this would cause a good deal of inflation. But that will take place anyway once the money that's already been stuffed into bank coffers begins to circulate.
The money system bears little or no resemblance to a free-market economy at this point. Never have so many words been written to justify so little Central banking is a kind of counterfeiting writ large. That's all it is. The rest of it – the pontifications and big words designed to provide maximum confusion – are merely part of the cover-up.
The "crime" to begin with is that a few people have control (by subterfuge) over the world's printing presses. Until this control is loosened, the rest of us will have to live under an increasingly bizarre and abusive system.
Conclusion: If we want to begin to remove the distortions of the current economic cycle, focus on the financial industry first. And if you are feeling especially ambitious, start at the top with the central banks.