Debt and Danger Grows as Risk Is Transferred to the Public
In this episode of GWiZ Weekends, Emerald Fox and Lynette Zang explore a growing financial threat that most people don't see coming. Private equity firms are taking on more and more debt, not to invest in growth or operations, but to pay themselves massive dividends. While it may be legal, Lynette explains how this practice is putting the entire financial system at risk.
Private Equity and the Illusion of Profit
The discussion begins with a troubling post from the Financial Times, highlighting how private equity owners are piling on debt to pay themselves dividends. Emerald Fox rightly questions how such a move can be allowed.
Lynette Zang does not hold back. She calls it legalized cheating, a strategy designed to pull money out of companies without taking on personal liability. Private equity firms borrow against the businesses they own, pay themselves dividends, and leave the companies—and ultimately the lenders—on the hook when things go south.
This, Lynette explains, is a classic Ponzi-style setup. It brings in new money under the illusion of profitability, but eventually that stream dries up and the structure collapses.
Hidden Ties to the Banking System
The real danger lies in what the public cannot see. Private equity is not subject to the same disclosure rules as public companies. These firms do not have to share how much debt they carry or how they are spending investor funds. That lack of transparency creates a major blind spot in the financial system.
According to Lynette, private equity has taken over roles that traditional banks used to fill before the 2008 financial crisis. That shift has expanded private equity’s influence across the global economy. While these firms may seem independent, they are closely linked to the banking system. When they fail, the damage does not stay contained. It spreads to the broader financial world.
Rising Interest Rates and Zombie Corporations
Emerald raises another important issue. If interest rates are not falling, how are these firms still borrowing so aggressively?
Lynette points out that during the era of zero interest rate policy, or ZIRP, money was virtually free. That low-cost borrowing fueled the dividend strategy. But interest rates are no longer near zero. Loans today may carry rates of 5 percent, 7 percent, or even 11 percent, depending on the borrower's risk profile.
Many companies that rely on these loans are now what Lynette calls “zombie corporations.” These are businesses that have not been able to pay the full interest on their debt for at least three years. Instead of letting these companies fail, lenders often give them more money just to keep up with interest payments. This keeps the debt off their own books and avoids immediate losses.
While it is difficult to confirm the full extent, Lynette suspects that private equity firms are using similar tactics behind closed doors. The cycle continues only as long as new money keeps coming in. Once that inflow stops, the entire scheme breaks apart.
When the Public Pays the Price
What happens when these firms can no longer keep up the charade? Lynette warns that the result could be the next financial crisis. And just like in 2008, the public will likely be forced to pick up the tab.
She points to past examples like Boeing, which borrowed heavily for stock buybacks and shareholder payouts. When financial trouble hit, taxpayers ended up bailing them out. Private equity firms, Lynette says, are following a similar path but on an even larger scale.
The burden eventually falls on taxpayers, who are already struggling with inflation, high personal debt, and increasing economic pressure. Lynette believes we are rapidly approaching the next major crisis. Although she cannot pinpoint the exact moment, the signs are already in place.
Private equity may not be the only trigger, but it is a major one. Its rapid growth since 2008 and its deep ties to the financial system make it a serious risk.
Prepare with Sound Money Strategies
Lynette's message is both urgent and clear. The debt levels across corporations, governments, and individuals are unsustainable. The illusion of stability is cracking. It is time to prepare.
This is the moment to shift to sound money strategies based on tangible assets like physical gold and silver. These real stores of value have withstood every financial storm. They offer protection when paper assets and debt-based schemes collapse.
If you are concerned about where this economy is heading, now is the time to act. Reach out to the team at Zang Enterprises to learn how our sound money strategies can help you protect your wealth, achieve financial freedom, and prepare for the economic collapse that is no longer just a possibility.
