American Hoarders

This piece has had me noodling for a couple of days

American businesses currently have $1.9 trillion in cash, just sitting around. Not only is this state of affairs unparalleled in economic history, but we don’t even have much data to compare it with, because corporations have traditionally been borrowers, not savers. The notion that a corporation would hold on to so much of its profit seems economically absurd, especially now, when it is probably earning only about 2 percent interest by parking that money in United States Treasury bonds. These companies would be better off investing in anything — a product, a service, a corporate acquisition — that would make them more than 2 cents of profit on the dollar, a razor-thin margin by corporate standards. And yet they choose to keep the cash

My immediate reaction was to be a little angry. These business GENIUSES can’t figure out any way AT ALL to take that cash and make more than THAT.  They have entire DEPARTMENTS of human beings that do nothing but crunch numbers. I never went to business school and I’ve done stuff that managed to return better than 2 cents on the dollar on my money (I’ve also figured out ways to do worse).  Most small business people can take tiny amounts of cash and turn that into equipment that improves efficiency and returns way more than 2%

By the way, if you’re thinking this is about Obama/Obamacare/”creeping socialism”

This strange vogue for corporate hoarding seems to have begun around the turn of the millennium

You know, when Obama was an Illinois state Senator

I had to chuckle to myself when I suggested in my own mind that Trump should announce tomorrow that when he becomes president, he will force those corporations to spend that money, hire people, and grow the economy

Let’s get that out of the way quickly: I don’t think government should be in the business of making hoarding companies spend their money and no one is even suggesting that. Even Bernie Sanders. I also don’t think that our politicians need to incentivize these companies to spend this cash

It would be kind of funny if one of those hoarding shows on television had a host who performed an “emergency intervention” and broke into a CEOs house and found nothing but stacks and stacks of cash littering every square inch of space

Sir, you know you have a problem

I know, but I just can’t let go of this money. I mean, this stack over here was from 3rd quarter of 2012 and those were the happiest days of my life

The big question is why? Why is this happening?

The answer, perhaps, is that both the executives and the investors in these industries believe that something big is coming, but — this is crucial — they’re not sure what it will be. Through the 20th century, as we shifted from a horse-and-sun-powered agrarian economy to an electricity-and-motor-powered industrial economy to a silicon-based information economy, it was clear that every company had to invest in the new thing that was coming

So, the truth is that they’re not afraid something bad is coming, but that something good could be coming. This could be very good news, but when we will know what the new thing is? When will we know it’s “go time”? Time to invest and get more than 2% return on the cash that’s just sitting around

Of course, they could be sitting on the cash because they expect another ’08-’09 type of crash. But, you can’t live your life that way, can you? This is disturbing on two levels:

  1. How can you live your life in fear? Sure, being cautious is important, but what great American business icon achieved anything out of fear?
  2. CEOs and senior management know that we haven’t done the things we needed to do to prevent another collapse like we saw in the last decade

Here’s hoping that another massive American business boom, like we saw in the 90s, is just around the corner. Here’s hoping that the cash that’s not being spent right now, will be spent soon to create jobs, foster innovation, and improve people’s lives. Perhaps that’s why this years’s presidential race is so contentious: The combatants know there’s a lot of money out there just waiting to be spent and they’d love to take credit for the good times that could be just around the corner