| The article mentions the two major consequences: a) Zombie companies that should be dead but are propped up by taxpayer money/gov policy > This crisis is expected to be severe but short, lowering the risk of propping up inefficient "zombie" firms that should be allowed to fail. That may not be the case next time around. b) Moral hazards, where bad companies aren't punished for risk taking or immoral behaviour. > Plus, there are fears that an ongoing commitment to corporate bond purchases could create a so-called "moral hazard," encouraging companies to borrow more from less-selective lenders on the expectation that Fed intervention would limit risks. Market corrections are an opportunity to clean up a lot of cruft. But COVID isn't a typical correction, it's more of a pause button, until it can resume. I've noticed a trend where more and more politicians act like defenders of jobs or protectors of dying companies. That sort of thing is a minefield for governments. Those resources would be far better spent helping growing/successful companies grow by getting out of the way + giving social safety nets to regular people. Not corporate welfare to politically connected franken companies. That sort of political help to zombies is more common here in Canada (see: the SNC Lavalin fiasco) and is rampant in the even more hyper-protective countries like Japan and Germany - places where big successful companies are less common so they have deeper ties to politicians/communities, who keep them on life support. |