Zombie Economy America’s Future?

The US economy will face challenges from higher interest rates and AI-generated disruption, which may lead to policies aimed at keeping rates below their market level.

It’s easy to see the hardship caused by higher interest rates. In the US, rates on long-term bonds (ones that mature in 10 years or more) have trended up since the pandemic. This means consumers pay more for their debt and mortgages. Businesses pay more for loans. The government pays more to service its debt. 

But there is a cost to keeping rates artificially low for too long. 

Japan is full of what’s known as “zombie companies”: firms that aren’t profitable and don’t have a viable business model, but can stay afloat with cheap debt. 

Eventually, however, when inflation returned and interest rates around the world increased, Japan had to let its rates rise too.

Those zombie companies are now going out of business.

Some of America’s current economic problems are the result of past forays into yield-curve control.

The Federal Reserve’s QE during the pandemic is still causing problems in the housing market 

Allison Schrager Bloomberg October 13, 2025

https://www.bloomberg.com/opinion/articles/2025-10-13/a-zombie-economy-could-be-america-s-future

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