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Why Are Companies Hoarding Cash?

Posted by Larry Doyle on February 11th, 2010 8:20 AM |

In order for the economy to grow, for companies to hire, and for new employees to benefit, we need velocity in the money supply. The fact is, this velocity has slowed dramatically. Bloomberg highlights this stark reality on our economic landscape by writing, Jobless Suffer with Corporate Cash Climbing to $1.19 Trillion:

A majority of companies in the Standard & Poor’s 500 stock index increased cash to a combined $1.19 trillion while simultaneously reducing spending, keeping a jobs recovery on hold.

Caterpillar Inc., Eaton Corp., Walgreen Co. and General Electric Co. are among 260 companies that ended last quarter with $522 billion more than a year earlier after cutting capital spending by 42 percent. Economists say the dearth of investment is keeping the jobless rate at about 10 percent as the U.S. emerges from its worst recession since the 1930s. (more…)






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