Excess capacity creates bankruptcy creates restructuring creates excess capacity

I discuss a thought-piece from The Economist arguing that US bankruptcy laws perpetuate excess capacity. By helping companies shed debt and stay in business instead of exiting, these laws create a cycle of repeated financial failure.

Tue, 17 Sep 2002 • Links

Interesting thought-piece by The Economist on how bankruptcy laws may be hurting America. The logic is, industries with excess capacity have bankruptcies. The bankruptcy restores a balance. If courts help bankrupt companies shed debt and re-enter business, excess capacity again results. Leading to bankruptcies again.