I want to add to Invictus’ commentary taking Newsweek’s International editor, Fareed Zakaria, to task. There are three facts that I believe put the issue into much better context than Zakaria’s opinions do.

1) The average cash-to-assets ratio for corporations more than doubled from 1980 to 2004. The increase was from 10.5% to 24% over that 24 year period. That was the findings of a 2006 study by professors Thomas W. Bates and Kathleen M. Kahle (University of Arizona) and René M. Stulz (Ohio State). When looking for an explanation, the professors found that the biggest was an increase in risk.

Indeed, the phenomena of corporate cash piling up has been going on for a long long time. You can date it back to the beginning of the great bull market in 1982 to 86, went sideways til the end of the 1990 recession. It has been straight up since then, peaking with the Real Estate market in 2006. The financial crisis caused a major drop in the amount of accumulated cash, but it has since resumed its upwards climb.

This FT chart makes it readily apparent that this is not a new trend:

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chart courtesy of FT.com

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2) The total cash numbers numbers are somewhat skewed by a handful of companies with a massive cash hoard. Exxon Mobil, GE, Microsoft, Apple, Google, Cisco, Johnson & Johnson, Verizon, Altria, EMC, Disney, Oracle, etc.

3) Not only is this not new, but the media has been covering it for years. See for example, this 2006 USA Today about the same phenomena: Many companies stashing their cash. Or this 2008 Businessweek article: Stocks: The Kings of Cash.  Or this 2009 WSJ article: Corporate-Cash Umbrellas: Too Big for This Storm?.

So why all the sturm und drung?  Well, it makes for a good narrative — facts be damned. Zakaria, whose international reporting is usually excellent, does not let his apparent unfamiliarity with corporate balance sheets or history prevent him from opining on the subject. Perhaps Kartik Athreya should have been more focused on the mainstream media, instead of bloggers . . .

>

Update: July 12th, 2010, 2:30PM:
Be sure to see our spreadsheet analysis of the Cash and Equivalents: Corporate Cash: Top 20 Firms = $635 Billion

>

UPDATE 2: December 22, 2010 3:49pm

Jim Bianco reports corporate cash is 7.3% — exactly what the historical median has been.

>

Sources:
Why Do U.S. Firms Hold So Much More Cash Than They Used To?
Thomas W. Bates and Kathleen M. Kahle
National Bureau of Economic Research, March 2007
(PDF here
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=927962

Many companies stashing their cash
Matt Krantz
USA TODAY 6/1/2006
http://www.usatoday.com/money/companies/management/2006-06-01-cash-is-king-usat_x.htm

Stocks: The Kings of Cash
Beth Piskora
Businessweek, April 18, 2008  
http://www.businessweek.com/investor/content/apr2008/pi20080417_375812.htm

Corporate-Cash Umbrellas: Too Big for This Storm?
JASON ZWEIG
WSJ MARCH 14, 2009    
http://online.wsj.com/article/SB123698238718924581.html

Category: Financial Press, Really, really bad calls, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

54 Responses to “Corporate Cash Has Been Piling Up Since 1982”

  1. snapshot says:

    http://www.businessweek.com/investor/content/jul2010/pi2010079_863838.htm?campaign_id=rss_topStories

    Let those outfits do whatever they want with their cash. New job creation – innovation – new businesses should be the focus about now.

    Here is a Farrel piece about immigration and job growth.
    “Specifically, some of the world’s brightest brains and cutting-edge innovators come to learn and create in the U.S. – and they stay.”

    Also read “Why Andy Grove is wrong about job growth”

    New jobs are going to come from start-ups – not Exxon Oil.

  2. bmoseley says:

    this is a chart that would benefit from a log scale. it wouldn’t look so steep then.

  3. JustinTheSkeptic says:

    @snapshot, my guess is that you probably live within spitting distance of silicon valley, the place where everthing is about high tech and start-ups. My question is just how many jobs do you think can be produced in that arena? Even in the 90′s, when high tech was booming, we still had a construction industry that was humming at a pretty good pace also. There are so many areas of this economy that need to come back before any semblance of yesteryear will be noticed.

  4. Kort says:

    Nobody reads Newsweek anymore and with the format change last year, they stopped being “news” “week” and it’s just opinion pieces.

  5. snapshot says:

    Justin @ 9:35

    “…you probably live within spitting distance of Silicon Valley,…” LOL – I am from CA. Our only hope is jobs. Any ideas?

  6. Mannwich says:

    I guess old Fareed doesn’t have access to the same data, BR (and Invictus)? Or maybe it’s something else. I do believe it’s the latter. I’ll let everyone guess what that “something else” might be…….

  7. tenaciousd says:

    @ snapshot: Ah, yes. Bloomberg Businessweek. Mr. Wadwha is very smart. But, tell me, exactly which political party in America is willing or able to advocate for this suggestion?

    “Last, we need to provide incentives to American companies to keep research in the U.S. Grove didn’t mention the huge incentives that countries like China provide to Intel and other tech companies. The lure for them isn’t just cheap labor (with lax labor regulation), but also heavily subsidized infrastructure and cash subsidies. We may have to level the playing field in industries where other countries aren’t playing by the rules. But we need to be smart in how we do it.”

    Last time I checked, more than 50% of Americans think this is “socialism.” Isn’t it the Democrats’ timid efforts to do just these sorts of things with the stimulus (R&D tax credits, smart grid, broadband, health IT, etc.) that has them on the verge of an electoral wipeout? Of course, maybe if they’d been as aggressive with stimulus as they were with bank bailouts…

  8. Mannwich says:

    Precisely, tenaciousd. Socialism for bankers. The middle finger for Main Street, and politicians wonder why the electorate is so pissed? Good grief.

  9. Mannwich says:

    Post eaten. One of the naughty words apparently? I’ll try again.

    Precisely, tenaciousd. Soci@lism for bankers. The middle finger for Main Street. And politicians wonder (or maybe they don’t?) why the electorate is so pissed heading into the elections this year? Good grief. I know these folks live in their own little grimy bubble, but shouldn’t this be obvious?

  10. franklin411 says:

    @Tenacious
    Agreed, and Barry, this graph is fantastic. It shows just the point I will be making in my lecture on Reaganomics for my course on the US from 1960 to the present. Our economy is punk because we’ve become the French monarchy during the 18the century. The problem with France then wasn’t that it was a poor country. The problem was that it was an extremely wealthy country with all the money concentrated in very few hands. There was no access to capital because the aristocrats and the church owned most of the property and paid no taxes to the state.

    So as the state neared bankruptcy, it tried to tax the only group in society that it legally could: the poor. The result was the French Revolution.

    How does this compare to the US? Well, just substitute the rich and Wall Street for the aristocracy and the church. Instead of imposing new taxes on the poor, the state has been busily cutting any program that tends to increase economic opportunity for the common man. Let’s not forget that spending cuts are “pain” just as tax increases are “pain.”

    We’ll see if we have a French Revolution. I wouldn’t mind seeing a few thousand bankers’ heads rolling before the guillotine!

  11. snapshot says:

    http://www.latimes.com/business/la-fi-econ-canada-20100711,0,814060,full.story

    tenacious @ 9:52

    Ah….then we really don’t want to entertain the ideas regarding immigration/ the economy coming out of Canada.

  12. Kort says:

    @Franklin411

    Sounds good about the French revolution except that in the US today, the richest 20% pay 72 of all taxes (when factoring in payroll taxes, otherwise it’s even MORE lopsided) and the bottom 20% pay just .4 percent. How much, exactly, would say the elite and church were paying in the French revoltion days…would you say ~75%? I think not.

  13. Todd says:

    So is this the groundwork to force corps to pay out cash dividends next year after Tax rates go back up. Think of the windfall for govt in taxes. Plus you could use the argument that corporate america is stifling innovation and jobs by locking up these vast hordes of wealth.

    http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company

  14. constantnormal says:

    @Kort — I never thought I would find myself on the same side of an argument as Franklin411, but … try looking at assets by class or the revenue generated by assets … there is a while ‘nuther dimension to this situation, and it involves the accumulation of all the money by a tiny minority.

    Willie Sutton understood this so well, why doesn’t everyone see this simple truth? If you want money, you have to tax those who have it.

    This has not nearly so much to do with the fairness of taxation as to the effectiveness of raising cash.

    There is a quote from the weekend’s NYT review on the uncut autobiography of Mark Twain, regarding his views on this subject:

    “The world believes that the elder Rockefeller is worth a billion dollars,” Twain observes. “He pays taxes on two million and a half.”

    This situation is not new, but it has gotten out of hand, and it seems that the “natural” remedy is either bloody revolutions or devastating depressions, both of which strip the wealthy of their accumulation of assets that they have stolen from the rest of society by bending the government and mechanisms of society to their will. And I use the term “stolen” with all due caution and consideration, as it appears to be the term that best fits the Reality of the situation.

  15. Super-Anon says:

    Also need to adjust that number for the growth in GDP for it to be meaningful. Really it seems to me you should be looking at nominal cash reserves / nominal GDP.

  16. constantnormal says:

    To be more to the point — it is possible for the wealthy to both pay most of the taxes AND pay at the lowest rates — all it takes is for the wealthy to own 99% of everything.

  17. KentWillard says:

    Agreed on numbers being skewed by the large tech companies. Too bad that the firms that should be the most innovative don’t have enough investments for their cash. Though I doubt this is new, and probably says more about the huge amount of money made from the initial business model, and the difficulty sustaining innovation as firms grow and age.

    Business debt increased around 10% annually from 2005-7. It fell 2.5% in 2009, and is flat in Q1 2010 (though up for corporations, if that can be sustained after Greece). Cash has moved inverse to debt, so balance sheets should look even better. However it underscores that domestic private investments haven’t recovered much, and remain much lower than in prior years – about where it was in 2000 (another case of the lost decade). And lower investment has bad implications, in many ways (low depreciation, low innovation, low aggregate demand, low employment) for the future.

    Analysis is clearer if political conclusions are left behind.

  18. constantnormal says:

    I do reject the notion that the corporate masters are hoarding cash simply to line their pockets. They can pay themselves kingly compensation whether they have huge cash hoards or not.

    This has more to do with the (in)ability to deploy that cash in ways that seem likely to turn a profit, and the incentives to hoard cash rather than pay it out as dividends. Some of this is a natural process of building weapons to use in corporate takeovers, anticipating that the national looniness in matters fiscal will lead to an economic crash, and provide a smorgasbord for strong companies with cash hoards, and a lot of it is the natural accumulation of more money than CEOs know what to do with due to the relentless cutting of jobs and outsourcing that has taken place over the span of time since the 1980s.

    Eventually, the reduction in domestic employment will reflect upon the Bananamerican consumer’s ability to buy more stuff, and the companies that do not have a lot of international business will shrink and die, while those with a substantial amount of global business (check BR’s list in item #2) will prosper.

    We have all our incentives positioned to destroy domestic employment with emphasis on offshore manufacturing, carpetbagging the profits back to the corporate mother ship. Until we somehow convince the Congress to change those incentives, this is the new normal.

  19. Petey Wheatstraw says:

    What the corporations are hoarding is what was supposed to ‘trickle down.’

    Does it take all that much street smarts to see the problem with this idea:

    “If you give the pigs control of the food supply, there will be more food for all of us.”

    We actually bought that lie (on credit, no less).

    We’re a nation of bumpkins.

  20. Petey Wheatstraw says:

    BTW:

    f411: Good analysis.

  21. ezrasfund says:

    Dividends!!!

    Is it really possible that the owners off companies like AAPL and GOOG, to name 2, have not taken any payouts from that mountain of cash?

    This is largely a tax avoidance scheme. By not distributing cash no taxes are paid on dividends, but the shareholders can still count them as assets. Nice if you don’t need the money.

  22. brianinla says:

    How much cash do they really have left after they pay their debts? Corporate bonds in one hand and cash in the other cancel each other out. I have no idea if it’s minor – any graphs of true net cash holdings?

  23. Deborah says:

    Interesting post, but it leaves me with questions.

    I have not torn into a stock for its fundamentals for a while, and I quit doing it because it took massive amounts of time and my conclusions about most stocks were the similar. Many corporations were taking on massive amounts of debt, or diluting stocks with issuing massive numbers of shares.

    So, how much of this cash hoarding comes from actual earnings?

    How many of these companies have an excessive burn rate? I can see in hard times such as what we have been experiencing that companies may be going through their excess cash, but is the company strong enough to turn it around in a reasonable time frame?

    How is that cash-to-asset ratio calculated? An average within all companies, or taking the total cash of all companies and total assets of all companies? There is a huge difference in what it is telling you depending on the method used.

    What percent of this hoarding is by the big companies mentioned?

    What I have repeatedly seen from this study is people using the information in context that corporations are healthy and strong because never before have they had so much cash on the books, and that is a poor conclusion, imho, without looking at the very least the company’s burn rate, debt level, and actual source of cash. Issuing equity, imho, actually makes the companies worse investments because of dilution.

    Another question, how much of this cash has been raised for these line-the-pockets-of-the-executives-at-the-expense-of-the-investors-share-buy-back-programs? They increase short term demand for the shares, raise the price, and enable executives to dump their shares and options at huge profits for themselves.

    You say

  24. tenaciousd says:

    @Kort

    “…the richest 20% pay 72 of all taxes…”

    I’m not gonna bother to check your stats, but get real. I’m just inside in the top 20%. Richer than most? Yes. So rich I don’t need my next paycheck? No. There’s a steep dropoff in the real liquid wealth after the top 5%–maybe even the top 1-2%. So, that additional 15% you throw into the figure masks the reality of what you’re describing. Also, considering what I’m sure Franklin411 well knows, it’s that additional 15% who will start the next revolution, not the peasants.

  25. TDL says:

    tenaciuosd,
    The IRS releases the breakdown every year. When looking at income taxes (not all federal taxes) the further you move up the wealth chain the larger the portion of total income taxes is paid by those groups. It is a progressive tax system (even with the best advisors & lawyers.) Excellent point about the real liquid wealth however. I have a good friend who just ascended to the ranks of the top 20% income earners & he certainly has no wealth outside of his income. Now, who stole my schnitzel!

    Regards,
    TDL

  26. Petey Wheatstraw says:

    The distribution of wealth is even more skewed than the allegedly disproportionate tax rate. Who gives a damn if you pay 72% tax on 90% of the wealth if that tax rate results in a revenue deficit to the government (a deficit that is automatically put onto the backs of future generations of average Americans)?

    If being wealthy carries too much of a tax burden, let those doughy mofos come on down to what’s left of the middle class and see how they like it here.

  27. dimm says:

    Simple: inverse relationship with the interest rates.
    Create inflation, which will drive the interest rates up and the corporate cash pile will disappear.
    Businesses, just like individuals will save more when there is no inflation and spend more when cash is not a good store of value.

  28. TDL says:

    Generally, why is there such a big hub-ub (I think that’s the correct spelling) of what Zakaria is saying. His foreign policy writing is sometimes interesting & thought provoking, but why are paying attention to him about business. It seems to me that Zakaria is merely expressing his buyers remorse over Obama.

    It seems to me that this is a natural economic process. What we are witnessing here is the formation of new pools of capital that will, eventually, lead to investment in a new economic expansion (what leads that expansion is up for debate.) Some I’m baffled why some are calling for a way to get at this money. Let the formations occur, it will lead to new investment (at some point.)

    Regards,
    TDL

  29. TDL says:

    Petey Wheatstraw,
    The deficits are a fact of the obligations that were imposed on the U.S. by previous generations not because the wealthy aren’t taxed enough. Destroying or maiming someone simply because they have it better than you is envy, not a moral or rational basis for economic policy.

    Regards,
    TDL

  30. Transor Z says:

    IMO H/H income of $150k is necessary for what used to be the middle class standard of living. Achieving that income puts you well within the top 20%.

    A good place to look is the IRS tax bracket tables. That tells the tale of who’s doing the heavy lifting in terms of tax burden, which tends to be the people in the 20th to 5th percentiles. I base that opinion on both gross dollars and proportionate share of take-home.

    When you start talking the 5th percentile and up, you have to start looking beyond “income” and start considering net worth, capital holdings/stock options, things like that.

  31. GeorgeBurnsWasRight says:

    I think while everyone here is focusing on recent events, based on the chart this trend started in 1982 and to me doesn’t seem to have been much affected by varying presidents with varying economic policies or even the various wars we’ve fought in the Gulf countries. And during this time enormous technological change and the vast changes in financial markets haven’t seemed to affect it either, except possibly for the wiggle the past 5 years.

    So why for almost 3 decades have American companies been accumulating more and more cash?

    Second, is this a world-wide phenomenon? Either way, that answer is significant in understanding this chart.

  32. Petey Wheatstraw says:

    TDL:

    If you see a moral or rational basis for economic policy that disenfranchises and impoverishes the majority in favor of the minority, I’d love for you to point it/them out (especially in light of free-market capitalism).

    Although you attribute my comment to envy, I deny it. Equity is more like it. Care to take a stab at morally justifying greed and crony capitalism as the basis for an economy?

    As for your comment at 11:52 am, please explain where these ‘new pools of capital’ are coming from, and why none are forming in the middle class. You’re surprised that some are calling for a way to get at this money? Pray tell, since the money is being created and allocated even as I type this, can you tell me exactly who has already gotten at it, and why?

  33. Clive Crook says:

    A president under business attack

    Heads of US businesses who once thought well of President Barack Obama have turned to grumbling. These days they come not to praise, but to accuse him of over-reaching and indecision. The outlook for taxes and regulation worries them, they say. There is too much uncertainty. This is holding back investment and growth.

    These themes came to prominence after Ivan Seidenberg, boss of Verizon, gave a speech last month as chairman of the Business Roundtable, a club of US company leaders. “By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses,” he said. He had previously been viewed as an Obama ally.

    Jeffrey Immelt, head of General Electric, also sounds disillusioned. The US “has to become an industrial powerhouse again but you don’t do this when government and entrepreneurs are not in synch”, he told an audience recently.

    It is hard to find a chief executive with a good word for the president. Do their complaints make sense? Is Mr Obama an anti-business president?

    The idea is not groundless. Like most liberals, Mr Obama is suspicious of the profit motive, and wants the government to play a bigger role; the need for stronger regulation is a constant theme. But what did the CEOs expect of a Democratic president? Measured against what might have happened, their charges seem unfair and even absurd. They should be thanking Mr Obama for his restraint.

  34. Mannwich says:

    Great points, Transor. Someone making $150K in many areas of the country is not “rich”. Doing well, for sure, but not “rich”. The tax code needs to be more progressive for the uber-wealthy. Will it happen? I think not. And we all know the answer why.

    Any discussions about cutting the deficit without cutting military spending are a complete waste of time, IMO. It shows the level of unseriousness that’s out there regarding this discussion.

  35. DL says:

    The comments directed at Fareed Zakaria apply to Kudlow as well.

    Kudlow should know better…. and probably does.

  36. Mannwich says:

    @DL: I suspect that Sir Goldilocks does indeed know better, but he chooses to be disingenuous, which is yet another reason to loathe him so much.

  37. plantseeds says:

    ezrasfund Says:
    “This is largely a tax avoidance scheme. By not distributing cash no taxes are paid on dividends, but the shareholders can still count them as assets. Nice if you don’t need the money.”

    not necessarily so….there is an accumulated earnings tax on funds improperly retained. The rate on this tax is a flat 15%. Without a specific, definite, and feasible plan for the use of accumulated funds, the tax applies.

    http://www.taxalmanac.org/index.php/Sec._532._Corporations_subject_to_accumulated_earnings_tax

  38. DeDude says:

    Tax that cash. Ain’t no problem that can’t be fixed by changing (taxing) the incentives. Taxophobia is a national pastime and provides a great “herding” tool when you want to move things. Anything above a certain % of market cap (52 week average) should be taxed. Then they would find some good use of that cash or pay it out to shareholders.

  39. [...] mentioned earlier that corporate cash has been piling up since 1982. The number that is being bandied about (via the Fed) is that the 500 largest non-financial firms [...]

  40. Dow says:

    This is probably too late in the thread to get a reply but I will ask anyway.

    What exactly is ‘cash’ – US currency, money market, mutual funds, cash equivalents?? Commercial paper is considered a cash equivalent – is CP cash?

    Hedge Folios had a post on Cash & Cash Equivalents some time ago that I still occasionally refer to. Now, this isn’t my area of expertise so I would really like to better understand this post and the articles on ‘cash’ – and to do that I really need to understand what exactly is meant by ‘cash’

    Thank you!

  41. TDL says:

    Petey Wheatstraw,
    There is no moral basis for crony capitalism (or Mercantilism.) Greed is a human condition, no matter how much we wish to deny it can not be abolished (and the 20th century is replete with attempts to abolish greed & other sins.) Furthermore, I never attempted to rationalize the current system as moral. I stated that capital formations were occurring and that they should be allowed to occur. These formations are not occurring in the middle class because the middle class currently carries too much debt. Once the overhang from these debts is wiped out, then over-indebted members of the middle class can begin to save. These pools of capital are coming from existing business activity (I exclude the banks here, because they were & remain insolvent institutions propped up by the Fed and should have been taken through bankruptcy 2 years ago.)

    You allege some either criminal or other unseemly activity on the part of business or the government that is taking money from one group and giving to the other. Frankly, the onus is on those that make the claim to prove this impropriety. The mere act of selling a good or service is neither a criminal nor an immoral act. However, when a corporation or individual makes use of political connections in order to create new laws, regulations, taxes, licenses, or any other sort of mechanism to prevent competition or extract (involuntarily) wealth from any group (be they rich, middling, or poor) that act is immoral. Not all companies act in this manner, however, it increasingly becoming the status quo in the U.S.

    Regards,
    TDL

  42. Petey Wheatstraw says:

    TDL:

    In the US, greed was effectively regulated during the last two-thirds of the 20th century. Remember usury laws? Interestingly, this was also boom time for business and the middle class.

    The act of selling goods and services is all fine and dandy. Please, tell me, are derivatives goods? Is the creation of them a service? Is fiat money a good? If so, exactly why should anyone profit from its creation and why should the creation of it be monopolized?

    The middle class carries too much debt because the upper class has hoarded all that was supposed to trickle down. In case you missed it, the middle class hasn’t had a pay increase since the mid 1970s (since Nixon defaulted on our debt). In that same period, the uber wealthy (including those ‘people’ we call corporations) have increased their incomes beyond their wildest fantasies. It’s fairly obvious that the vast majority of our current problems can be tied DIRECTLY to the deregulation of greed.

    Taxes are a fact of life. Those who derive maximum benefit from our schema must also bear the brunt of taxation. That’s how society works, that’s how it has always worked, and it’s why ours isn’t working so well right now.

    You should g back and read franlin411’s comment.

  43. mbelardes says:

    Hey Barry, since when do you start shooting messengers on your blog?

    Did you or Invictus even READ Fareed’s article?

    Can you highlight the part where he is misreading the facts or distorting or misconstruing numbers and calling out Obama as anit-business? (I’m still yet to see your refutation of his claim that cash-to-assets is at a 50 year high, not that it matters).

    All he did was report on what the numbers were and what the CEOs were saying regarding them.

    Let me summarize the article for you so you can see the main point: “The U.S. government may be unable or unwilling to produce the cash for a second stimulus while U.S. Corporations are sitting on mountains of cash but are unwilling to deploy it as CEO’s are cite Economic and Policy risks.”

    What’s wrong with that? I just don’t think that article was worth two blasts on the guy and distortions about what the aim of his article was (and very serious insinuations about his journalistic integrity). He never said Obama was anti-business. He just made the point that businesses have a lot of cash and then he asked some CEO’s and relayed what they said.

    So criticize the CEO’s and apologize to the messenger. Shit man, if you read Invictus’ first post you would think Fareed was some right wing rant artist. As someone that read both of your blog posts and THEN read Fareed’s article, you guys come off as asshats attacking a guy just relaying information.

  44. Invictus says:

    @mbelardes

    …you guys come off as asshats attacking a guy just relaying information.

    This is, perhaps, the saddest and most telling commentary of all, and speaks to how many now perceive the role of journalism and, regrettably, how some journalists see themselves. What manner of journalism is it that simply relays information without doing any critical analysis? Stenographers indeed!

  45. Invictus says:

    @Dow

    Here is what is included by the Fed in that number:

    Foreign deposits
    Checkable deposits and currency
    Time and savings deposits
    Money market fund shares
    Security RPs
    Commercial paper
    Treasury securities
    Agency- and GSE-backed securities
    Municipal securities
    Mutual fund shares

  46. ezrasfund says:

    @Plantseeds

    Tell me when AAPL, GOOG, et al. start paying that tax, or did I miss it? I like to see some of the corporate reports that show this expense. ( But I do know my little S Corp had to be careful not to run afoul of the rule.)

  47. TDL says:

    Petey Wheatstraw,
    I am old enough to remember usury laws (although too young to have been affected by them.) This is a questionable claim at best. I don’t see how high interest rates on questionable loans have impacted the middle class. Furthermore, usury laws only enabled organized crime to benefit off of greed (and introduced violence, when it was not necessary, in order to enforce contracts.) Also, business was not booming in the post war era because of usury laws; business was booming because we laid waste to most of the industrialized world and socialism took root in the rest of it. Business boomed in the U.S. because we were the only game in town (along with Canada) & and there was a lot of capital that needed to be replaced. Lastly, usury laws are a red herring to the present discussion.

    Also, I fail to see how my argument lead to me be an advocate for fiat currencies, which I am certainly not. In fact I explicitly excluded the banks from my argument because I believe that they have participated in very criminal & immoral acts, one of which is they way they benefit from the present monetary system.

    Derivatives, once again a red herring. Furthermore, exchange traded derivatives date back to the late 1500′s. Some historians have even found evidence of derivative like agreements dating all the way back to the Roman Republic (no, I’m not going to look up relevant citations.) Derivatives are ancient. If you wish to make an argument that through the machinations of the large banks & the U.S.G. banks were able to shift the obligations of their balance sheets, fine; I agree. In fact that has been known for quite some time now (Janet Tavakoli wrote a book on the topic over a decade ago addressing those very issues.) Again, not germane to the conversation.

    The middle class carries debt because the middle class, of the boomer generation, decided (in aggregate) to abandoned the bourgeois values that created wealth in the U.S. to begin with. It wasn’t a conspiracy among the “rich” to somehow force them. It was the reckless attitude of living to the hilt and not worrying of who will have to pay the bill.

    I fail to see how any of this is relevant to my argument that the capital formations that are currently occurring should be left alone. I don’t want to “tax that cash”. I don’t even want to tax the banks, because they should be in bankruptcy where they belong. What I’m saying is is simple, leave it alone. This especially goes out to anyone over 50; you’ve made a big enough mess already so stop meddling.

    Regards,
    TDL

  48. takloo says:

    @brianinla – why not graph net cash? shouldn’t (cash & equivalents – current liabilities) give a truer picture?

  49. [...] I’m now glad I was too slow on the draw to post much last week on the controversy over why corporate America is sitting on such large piles of cash. It turns out (via Ezra Klein and Tyler Cowen) that this is a longstanding trend. Barry Ritholz has copied charts and graphs from the FT that will finally make it clear: [...]

  50. [...] where households are desperately trying to repair damaged balance sheets, large corporations are hoarding cash, and demographics are shifting for the worse, it’s open to debate whether the policy [...]

  51. [...] love to spend this money were it not for all the uncertainty being kicked up in Washington. But, as Barry Ritholtz points out, corporations have been increasingly hoarding their cash for decades. Between 1980 and 2004, the [...]

  52. [...] Corporate Cash Has Been Piling Up Since 1982 (TheBigPicture) Posted: July 15th, 2010 Categories: Business Tags: Comments: No Comments. Write a comment Name: [...]

  53. [...] has been doing with their money in the midst of this, here’s the answer from Barry Ritholz: Sittin’ on it.  But that started back when Thriller was the new [...]

  54. mbelardes says:

    Invictus,

    Like I said, you didn’t read Zakaria’s article. And if you did then you have problems reading, stick to numbers.

    Don’t quote one line from what I wrote and now skew what I said too.

    It’s simple, Zakaria quotes the Federal fucking reserve and then asks a few questions of CEOs. He’s filling 500 words on a byline. He’s a reporter, REPORTING. Correct me if I’m wrong but it’s not really Zakaria’s responsibility to have a side blog and deconstruct the feds numbers over three posts and a bunch of graphs, is it?

    It wasn’t an opinion or analysis article. You act like that was the damn WSJ Opinion section. Whatever, just dismiss what I said. That’s fine. But the blog loses integrity when you put someone like Zakaria on blast and then the commenters are comparing him to Larry Kudlow. Gimme a break.