$2 Trillion Cash Hoard Is Getting Bigger
Six months ago, I was venting about how our tax system is based on the flow of cash through our economic system. I put Apple, Microsoft, Google, and Cisco to task for keeping their cash overseas. In the past week, the federal government announced more job creation than expected but an increasing number of unemployed. The federal government has also failed to address the real number of unemployed/underemployed by not accurately reporting how many people have stopped looking.
A computer glitch by Knight Capital Group caused bad trading that lost them $440 million in a matter of hours, and people speculated that people were fleeing investing because of fears of rogue computer trades. The reality is that the biggest private investors in the world… the corporations themselves aren’t spending money. They’re all still sitting on a nearly $2 trillion in cash. This is reported over and over again, but $2 trillion worth of labor just sitting in the bank not doing any work. It’s never being taxed. It’s never being used.
While the federal government does nothing about this “fiscal cliff”, corporations are standing on the sidelines with all their cash while people can’t keep their homes, can’t work, can’t pay off their loans, and are struggling to survive. As I said 6 months ago, President Obama has justified several bills to get cash flowing in the economy.
These are originally American companies who grew off the backs of American workers and American consumers who are holding up the circulation of money in this country. President Obama justified the following bills by claiming that cash flowing through the economy would help the country recover: American Recovery and Reinvestment Act of 2009 (stimulus bill), Car Allowance Rebate System (Cash for Clunkers), and Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Obama-GOP tax cuts).
Well, Mr. President and Congress, cash still isn’t flowing. While we can choose to believe “Multinationals and the High Cash Hoarding Puzzle” from National Bureau of Economic Research that was released a couple months ago that absolves Congress and President Obama for being at fault. I prefer to believe that NBER is just showing its Democratic leanings when the Economist showed years ago that 46% of NBER are self identified Democrats compared to 10% self identified Republicans.
Regardless of what you believe, our corporations are sitting on $2 trillion while our people are suffering and our government does nothing. Maybe they’re all just too big, too scared, and need too much cash to protect themselves to ensure survival.
Stay employed, my friends.