This should be of concern because it suggests that capitalism’s process of creative destruction isn’t working. Zombie companies tend to be less productive than others, so their survival may well be a part of the explanation for the low productivity that has bedeviled the West since the financial crisis. 

All of these factors, I believe, are at work in the rise of negative-value companies. In all cases, a return to higher interest rates would bring this group great difficulties. Zombies and companies hollowed out by private equity would face an existential crisis, while we would see how well the new immaterial giants could cope once money had a higher price.

That in turn might help to explain why last year’s moderate rise in interest rates by the Federal Reserve was greeted with a horror, and a market sell-off that prompted a U-turn (and this year’s rally). Investors evidently didn’t want to discover what would happen to negative-value companies once interest rates returned to normal. 

Now, the hope must be that they can postpone that moment indefinitely. If  that cannot happen, then the time will come when we will all learn a lot more about the true value of intangibles. 

This opinion piece was provided by Bloomberg News.

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