Posted on 04/01/2010 2:03:41 PM PDT by jerry557
One piece of economic data that has caught the attention of Byrnes, and others in his predicament, is a fairly staggering figure that comes out of the Bureau of Economic Analysis: Despite widespread unemployment, the BEA reports that U.S. corporations, reluctant to expand in an uncertain economy, are sitting on $1.6 trillion in cash reserves, a record amount, according to BEA economist Greg Key.
Even looking at the companies in the Standard & Poor's 500 index of blue chips -- and stripping out financials, which are required by regulators to keep large cash reserves in order to cushion against risk -- the cash on hand number is still rather monstrous: $1.1 trillion. To put that in perspective, as a percentage of companies' total market capitalization, that $1.1 trillion is more than double the ratio seen before the crisis.
"Cash is piling up faster than companies can figure out what to do with it," said David Bianco, head of U.S. equity strategy at Bank of America.
Asked about the mountain of corporate money sitting on the sidelines, the out-of-work Byrnes offered his own suggestion for what to do with it.
"Companies should absolutely spend some of that money to put people back to work," Byrnes said by telephone earlier this week, clearly frustrated. "I suppose they need to make shareholders happy, but come on already."
"Companies slashed their work forces and now find that they could function far more resourcefully than they ever realized possible," Bianco said. "If anything, we could start to see some of the money being used to expand overseas or to acquire other companies. In either case, that does not bode well for job creation. In fact, mergers lead to job reductions unfortunately."
(Excerpt) Read more at abcnews.go.com ...
Collectivists, historically,
have made “hoarding” illegal.
Of course, “hoarders” are defined as “anyone looking ahead and preparing for hard times”.
It is a matter of perspective. I think they are CHOOSING not to spend money or take on new obligations, likely just as a result of a lack of confidence in the economy and having an administration in the White House that they cannot trust. Choosing not to spend money is not the same as hoarding or refusing to hire people.
If I were a business owner, I’d be hoarding my cash too, at least until Obama has been voted out of office in 2012 and a hopefully pro-business President takes over.
I'd correct this sentence from the piece. the root cause of the uncertainty is the current majority government which is hostile to business and distrustful of the economy.
Yeah, companies just hate expanding and investing in the future. /s
If you are a business it is. Businesses #1 goal is to stay in business. When marxists are in control you just want to survive.
I think you worry too much. This country is in revolt because they are tired of the war on their employers and businesses! It’s not a winning issue for the dems. It makes them look short sighted and communistic. I am glad companies are ‘hording’ cash. It means that as soon as we get rid of the democarts in November....they will start spending, hiring and investing. They are ‘hording cash’ because of Obama and the dems policies and they don’t know what’s coming down the commie path next. This ‘issue’ can easily be turned around on the dems...lol!
Yes, blame the evil corporations for the high unemployment rate. The Democrats in charge are just victims.
Let’s review why no sane business will hire:
1) Nationalization of Banks
2) Nationalization of Insurance
3) Nationalization of Student Loans
4) Nationalization of Mortgages (see FHA)
5) Nationalization of Autos
6) Nationalization of Energy (planned)
7) Massive Fiscal Deficits
8) Massive Currency Blowout
9) 0bamanomics: Punish success, reward failure
10) Income Tax Increases
11) Capital Gains Tax Increases
12) Employment Tax Increases
13) Tax Increases for being alive (0bummerCare)
14) “Stimulus” bills
15) Cronyism, vote buying, corruption
16) Civil unrest
17) Capital Flight
18) Etc.
You would have to be crazy to hire in this environment. Politically, this is good for Republicans, if bad for the unemployed, because there is no chance the 0bummer Administration will change its stripes to unwind all this damage.
Maybe they are saving up money for the lean times until January 2013.
Maybe companies are doing what the rest us are doing; hunkering down not spending a dime waiting for the communist in the WH to leave.
“”Cash is piling up faster than companies can figure out what to do with it,””
Viagra to tax and spend politicians.
It’s the companies’ money. They are not in business to employ people, but rather to make a product or service that consumers want to purchase. The employment part comes when companies have more business and need more employees to meet their prior commitments.
More business=more employees. See how that works?
Waxman will soom call all CEOs of large companies to explain why they are not hiring right now.
Yeah, we should MAKE those companies create jobs. With healthcare. And childcare. And retirement plans. And a free car. /s/
Oh spare us. A little cheese with that whine? You do realize this a conservative website, right?
Obama will tax cash reserves next.
Business bad, Government good! Let’s see how many Freepers swallow this one.
LOL, I should have read your post first. I said nearly the same thing.
FDR seized all the gold. So did Castro and Che. FDR “hoarded it at Fort Knox. No one knows where Fidel and Che hoarded it. Of course, now it’s all Castro’s. Isn’t it?
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