Corporate Welfare in a NIRP World, Part II

     (This thing called Negative Interest Rate Policy (NIRP) looms in front of a beleaguered investment community as an alternate universe, some strange and alien wasteland where failed central bankers go to play out their final days in ignominy and defeat.  It is bereft of anything resembling accomplishment or feted deed.  Near as we can tell, no one who's ever been there has come back alive through any actions other than those effecting the total obliteration of their tragic days trapped inside the damnable place. We have nothing in hand to guide us in searching out any possible future today's investors may have in this forbidden netherworld, and are hesitant to turn an adventurous eye downward, not knowing what one could possibly find amidst the horrors of monetary purgatory. Do not take the following to be our final word on the matter, or our current word, for that matter, starting maybe ten minutes after this particular conjecture gets published.

     The only thing we can say for sure, is that Keynesian economics has proven once and for all - and with absolute certainty - that parallel universes do exist, though one doesn't expect Academia to concur - or even acknowledge that Keynesian economics itself ever existed at all once that formerly erudite wordage has been seen to have finally hit the proverbial fan.)

     Exxon Mobil, Microsoft, and Johnson & Johnson have better credit ratings than the United States of America.  What happens with them when the central bank of the United States of America pushes interest rates on Treasury securities into negative territory through NIRP?  Will Exxon Mobil bondholders have to pay that company for the privilege of parking huge piles of dough in Exxon Mobil bonds?

     Theoretically, one surmises, it should become so.

     And thus, with bondholders paying Exxon Mobil interest instead of the other way around, one has to beg the question, why would a gilt edge NIRP corporation need to keep an equity balance on the books?  Any equity balance at all.  They'd still need shares, or a single share at least, because stock represents ownership and somebody has to own the business even if, after all the buybacks one would anticipate in the NIRP universe, it's just the CEO.

     Complicating that issue further, with Big Government subsidizing Big Business to the point where Big Business' interest expense has become interest income, would Exxon Mobil not become one of those state-owned enterprises like we see today in Commie China inside the extant parallel universe?

     In the world we know, some corporations function just fine without any long term debt at all.  Under NIRP would state-owned enterprises operate just as swimmingly without a dollar balance in the Equity section of the balance sheet?  Owners of a going concern need to put up money to stave off insolvency and bankruptcy.  Basically there's no other reason.  It's hard to see financial failure as even remotely possible when 1) the state has some weird kind of ownership interest in the enterprise and 2) you can always get people to pay you for lending you more dough whenever you need any.  No longer is there a wolf at the Big Business door.

     Talk about too-big-to-fail.  Under NIRP every gilt-edged enterprise would be too-state-owned-to-fail.

     Therefore, and admittedly the jump to our ultimate conclusion crosses bothersome unseeable terrain, in the NIRP universe, massive stock buybacks funded by staggering issues of new corporate debt will drive stock prices to unfathomable heights, and the bastards will find some way to screw us out of participating in it with them, leaving a tormented nation of people groveling for food at the feet of the trillionaires who used to be our business and political leaders in the soon-to-be cruelly forgotten alternate universe of today.

     Our condolences to you all.