Interesting post at CNBC that reveals [Ed: as usual without adequate explanation but I digress] S&P 500 companies are on track to soon accumulate record amounts of "cash", excerpt:
Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 percent and are on track toward $1.5 trillion for the Standard & Poor's 500, according to JPMorgan.This is interesting in light of some recent discussions here at MNE about "savings" and "investment". These "cash" balances building up at these corporations represent simply the record of fulfilled savings desires by the managements of these companies and as are all types of "savings", are part of the ex post record of demand "leakage" or demand "destruction" in the economies that these companies operate in.
The fact that world economies continue to underperform with output and employment gaps is signaling that sectors outside of the non-government corporate sector (addressed here in the article), which are the non-government household and external sectors, continue to be denied enough "cash" balances by the government sector (fiscal deficits are too small) to satisfy the savings desires of these other sectors. As MMT (Warren) says: "Taxes are too high" for our given size of government.
This non-government corporate sector seems to remain in the first position as far as which sector is best enabled to satisfy savings desires with "cash" as the non-government household sector has to spend their income first on necessities such as gasoline, food, utilities, medical, etc (great portions of which go towards the revenues of these S&P companies); and can only satisfy their own savings desires with any balances or "cash" they have left over after the purchase of these necessities. Which I'm sure many households have no such balances in left over after spending on necessities under our current US fiscal policy.
So in this "muddle through" economy with too tight fiscal and the corresponding marginally positive growth, it can easily appear that the lower income demographic segment of the non-government household sector remains left with just the "scraps from the rich man's table". In this case, the "rich man" can appear to be mostly the non-government corporate sector who are in the best position to be able to save or retain a surplus of the "cash" that governments are making available. But the real problem remains these negligent morons we have occupying positions of authority in economic policy making who continue to refuse to provide the "cash" to satisfy all non-government savings desires.
Matt,
ReplyDeleteWe in the MNE community appear to be converging on reality without much help from the outside world.
Nearly every new article posted up today and recently is an expression of the disiussions we have been having here, even though many articles are not MMT-centric.
They are beginning to discover what has been hidden in plain sight all along.
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ReplyDeleteHow much of that cash is held in overseas accounts that corps won't bring home since it will trigger a tax liability.
ReplyDeleteAlso relevant corporate layoffs at the highest levels since start of 2010
ReplyDeleteQuote:
North American companies have announced plans to eliminate 62,600 positions at home and abroad since Sept. 1, the biggest two-month drop since the start of 2010, according to data compiled by Bloomberg. Firings total 158,100 so far this year, more than the 129,000 job cuts in the same period in 2011.
Jonf,
ReplyDeleteIf these US registered S&P companies have foreign subsidiaries that "made money" overseas, then they cant really "bring it home (to the US)" as we in the US use US dollars...
so they have to just keep them as external "savings" in the foreign jurisdictions unless they can find another external entity with surplus USD balances that will in effect exchange these foreign liabilities for USDs with them...
there have been other reports where US Cos. have in excess of 2T in these foreign profits... I guess they can go to foreign governments and see if these foreign govts with all of the official foreign reserves would exchange their official USD reserves with them for whatever foreign currencies these companies are saving in...
You can see here that all virtually all of foreign holders of USDs (4T out of 5.5T) are foreign govts so dont see how these US companies could "repatriate" these $2T+ of retained earnings without the cooperation of foreign governments....
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
rsp,
Yes Clonal this is just rampant mercantilism and the associated chaos...
ReplyDeleteHousehold sector folks wont have income or savings to buy the goods for sale in the US ultimately and wont have income to service consumer debt if they instead try to go in hock to sustain consumption...
No other way it can turn out via the math...
rsp,
Here's an article on US firms with retained earnings ("savings") external to US:
ReplyDeletehttp://www.bloomberg.com/news/2012-03-02/cash-horde-expands-by-187-billion-in-untaxed-offshore-accounts.html
rsp,
here's another one:
ReplyDeletehttp://articles.latimes.com/2011/sep/08/business/la-fi-foreign-earnings-jobs-20110908
But this out of paradigm writer doesnt realize that these retained earnings are in foreign currencies in the jurisdictions in which they were earned....
rsp,
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ReplyDeleteMatt,
ReplyDeleteLook at Apple's Irish connection -
How Apple Sidesteps Billions in Taxes
Also Apple's tax strategies: 'Double Irish With a Dutch Sandwich'
Also I would do the same if I was In Apple's place.
The place to address inequality is via a progressive Income tax structure that was prevalent in the late 1950's. That structure encouraged philanthropy, and encouraged the CEO's to increase wages to the rank and file of their organizations. The philosophy being " If I can't keep it, I would rather give it away."
Clonal,
ReplyDeleteLooks like you cant beat the mercantilist... unless you put in some form of tariffs I guess...
Also this gets into corporate governance... ie if these corps could figure out a way to first get the currency changed out to USDs, and then would just pay these earnings out as (hopefully tax free) dividends, that would inject $1.5T NFA mostly into ERISA accounts and that would make up for a lot of the current projected shortfalls in the defined benefit ERISA accounts.. without having to liquidate stocks...
which if these morons stay in charge will probably have to be resolved via a combination of a fiscal bailout and a benefit cramdown as "we're out of money", etc... rsp
Matt
ReplyDeleteThis helps me remember too easily forgotten that the banks and the multi-nationals are really not far enough out of the virtual Fed economy - that is they are not in the RReal economy where cash savings are better served to the economy.
What is the difference if the zero's are all in the Fed or in the big banks and their big multinational friends ?
... nothing
It really means that there is no deficit which in MMT corresponds to savings and investment cash in the RReal economy like with the lower and middle classes as well as with small business.
There might be some negative zero's in the Fed's sheets but their central banks and the central banks' customers have all the zero's and the zero'$$$ are not making their way over to the RReal economy.
goog,
ReplyDeleteTake a look at Paul's chart that tom has linked to above at the NEP blog... shows some of the sectors and subsectors that are discussed here graphically...
rsp,