The Fed's Zombie Economy: ROI Crashes 80% In 40 Years

Tyler Durden's picture

Submitted by Daniel Drew via,

Breaking the zero bound has become a rite of passage in the post-2008 world. As Mark Jeftovic noted, "Once a financial market hits the zero bound in interest rates, it's like crossing the event horizon of a black hole - there is no going back." Indeed, the number of government bonds trading at negative yields increases every day.

Negative Bond Yields

In the new bizarro world where you pay banks for the privilege of giving them your money, one has to wonder what will be the next thing to break the zero bound. When one of the largest corporations in America has over $100 billion in revenue but can't even make $1 billion in profits, it's easy to imagine a few possibilities.

American corporations have been playing a musical chairs game where the loser gets taken out back and shot. During the last 40 years, the life expectancy of firms in the Fortune 500 has declined from 75 years to less than 15 years. In what Forbes called "the most important business study ever," Deloitte released The Shift Index, which compiles the ROI of 20,000 US firms from 1965-2009. The chart shows an 80% collapse in the average ROI of American businesses.

Declining ROI

With negative interest rates around the corner, how long will it be until the Fed props up the zombie economy and pushes average profit margins below the zero bound?

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MsCreant's picture

Okay, I'm no pro.

We keep borrowing from the future to consume now. 

Where is that borrowing gonna really come from if the promised work, to create the value, doesn't exist yet? 

It ain't magic.

Us here now will pay for it. 

And so it crashes because all the promises to pay cannot be kept.

It should not be allowed what we do.

Edit: This is not sustainable but everyone wants to pretend it is: "With negative interest rates around the corner, how long will it be until the Fed props up the zombie economy and pushes average profit margins below the zero bound?"

FreeMoney's picture

Profit margins are crashing just as much due to free trade agreements.

Pairadimes's picture

This mess reminds me of Hemingway's response to the question of how he went broke. "Slowly at first, then all of a sudden."

peddling-fiction's picture


I heard that the Deep State "helped him out" because he was a bit too friendly with Cuba.

froze25's picture

Barrowing from the future to spend it now only works for capital goods not for operating expenses. You build a bridge you get the benefit of the bridge and all the increased economic activity from people using that bridge. Barrowing for lets say a bomb is madness especially when the bomb is being used with no real goal in mind. The bomb is built then it explodes, it destroys and is consumed. Barrowwing from the future to pay for a TSA agent is also similar you have a person that could do something productive with their time (building cars etc) but instead they stand and basically keep us safe from a non-threat and produce nothing but take away from the future production. Bee stings kill more every year than terrorist.

Stormtrooper's picture

But Krugman would say that if the bomb is used to blow up the bridge, which is then rebuilt, then the bomb had value. Duh!

Turin Turambar's picture

"Profit margins are crashing just as much due to free trade agreements."


It's not really free trade if written agreements are necessary to implement it.

doctor10's picture

If somone won't pay you interest on money you keep in their bank, isn't the logical conclusion that EITHER the bank is broke and cannot afford todo so, OR that the money you keep their is worthless?


WTF-probably BOTH are true!!!

MsCreant's picture

Go you one further, The logical conclusion is the bank is broke AND you stand a hell of a big chance of not getting your money back!

We have forgotten how to do a good old fashioned BANK RUN!!!!

froze25's picture

So when is my credit card interest rate going to go negative?

starman's picture

Worry not Ms Crant, when the Fed  starts it's unicorn cloning experiment will all be millionaires! 

glenlloyd's picture

It's like the movie The Seventh Sign although this time no one will sacrifice to refill the well of souls.

We've borrowed from the future and now the future is almost empty..

malek's picture

It's called eating up the capital (of capital formation), and at some point, the seed corn.

savedeposit's picture

The simple awnser is real gold an silver (not the fiction you see at the charts)

MadVladtheconquerer's picture
MadVladtheconquerer (not verified) Feb 10, 2016 12:41 PM

I have a zombie virus in a vial above my desk.  I'm going to dump it into the water

supply after lunch.  You beotches are so doomed.  Doomed.  Doomed.  Doomed.


Dave Thomas's picture

Someone beat you to it cookie cutter, I'm looking out the window now, and all I see are folks shambling about jabbing at their smartphones.


MadVladtheconquerer's picture
MadVladtheconquerer (not verified) Dave Thomas Feb 10, 2016 1:30 PM

When you see those same folks running around eating each other's shit-for-brains, then you know I will have been


MsCreant's picture

We are consuming your post so I guess it's already started.

Chuckster's picture

You will not have negative interest rates unless the Fed thinks you will accept it.  About two weeks ago they started asking banks if they knew of any negative affects negative interest rates would have for the banks.  The Fed does intend to do this unless they get a backlash from the people.  Once again it is time to standup and say no!  The people in this country are getting what they deserve.

savedeposit's picture

Just exchange your digtal and paper for gold and silver, let them negative intrerest that when it is burried 10 feet undergound in a forrest/garden/place only you know ;-)

Bill of Rights's picture

FED can prop the economy up all day if it wants, you CAN'T FORCE PEOPLE TO SPEND! CASH OR OTHERWISE.

savedeposit's picture

The more force applied the more more resistance there will be

bbq on whitehouse lawn's picture

Banks dont have check cashing abilty and anything over 5k gets the nazi treament, overall they are unhelpfull.
If banks had cash maybe doing business would be less of a problem.
Bank is not even a proper word to discrbe these business i have less problems cashing in chips at a cosino.

Janet Shalom Bernanke's picture

Well zero is better else.  just keep the rates low so companies can keep buying back stocks, earnings are a thing of the past, and are soooo overrated and nearsighted.  :)



BennyBoy's picture

This monetary system has been used for hundreds if not thousands of years.


One day somebody will get it right.


It wouldn't be designed to fail on a regular basis like history shows, would it?!

froze25's picture

This system has only been in place since 1970s when gold was completely removed from the settlement of debts. You could argue that 1913 or 1933 but IMHO Nixon made the real fundamental change. Debt instruments counting as assets and such.

Chuckster's picture

LBJ was going to print money and for every $1 put in circulation they government would get back like $2.84 in taxes.  There was no need for poverty(war on poverty).  Senators actually got on TV and hailed this as the greatest idea of all time.  Negative interest rates and negative profits are right in line with LBJ's  (Washington's) thinking. 

No one has the market for stupidity cornered.

NEOSERF's picture

Probably has something to do with share buybacks and exploding executive pay but thinking about it hurts my brain.

gcjohns1971's picture

Without a numeraire to tie the relative values of financial assets to the physical world, we repeatedly discover that their value is ZIRP...or maybe even negative NIRP.

The currencies, after all, are based upon the assets.

Logic would dictate that real production of physical products under demand cannot have a negative value in the real world.

But the nature of the monetary system so distorts the relative value of things via monetary, arbitrary, and social redistribution of wealth that things under real demand, and things demanded only as a consequence of the monetary system cannot be sorted or weighed.

This is why businesses buy back shares, and cut divisions creating real products to expand their subsidiaries gambling in the finance industry...because finance under such a monetary system, and life, have nothing to do with one another.

Business goes where the money is.  And the monetary system systematically redistributes wealth away from production of life-sustaining values. SYSTEMATICALLY.

Hence it is more actuarially profitable to do arbitrage and derivatives than to create real physical products.  The inherent distortions in the system have become so gargantuan that 'Dreaming on Acetate' is now counted as of greater value than actual performance.

This is madness.  Truly.  Madness.

P'Od_Accountant's picture

"In the new bizarro world where you pay banks for the privilege of giving them your money, one has to wonder what will be the next thing to break the zero bound."  '


This is the primary reason why they want to get to a cashless payment system as rapidly as possible.  Well I for one won't do it.  I'm staying with cash as long as possible and will use alternative and/or black market sources.  Fuck these totalitarian facists.