American companies are hoarding almost $1 trillion in cash, but are unlikely to spend on expanding their businesses and hiring new employees because of continuing uncertainty about the strength of the economy, Moody’s Investors Service says.
Not so fast. The growing cash pile is hardly what it seems. The cash buffer also comes with massive workforce reduction, Capex or investment reductions, and a huge spike in corporate debt issuance and refinancing.
And even that aside, the bottom line is that companies have done nothing less than the inverse of what our Keynesian government is doing: they have cut all investment in future business to the benefit of building out a cash buffer (while the government has taken all future benefits to the present day courtesy of an unlimited taxpayer funded piggybank). And since this capex will need to be reinvested at some point, assuming some reversion to the corporate mean, it is only a matter of time before cash levels decline dramatically once again, only this time nominal debt levels, as pointed out previously, will be at fresh record high levels, courtesy of Bernanke's ZIRP insanity.
Source: nytimes.com
Source: zerohedge.com
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