Why Are Corporations Hoarding Trillions? • Hacker News Board

Re: Why Are Corporations Hoarding Trillions?

#161

Post by dsp1234 » Thu, Jan 21, 2016, 9:57 PM UTC

seiji wrote: post #120

markdown wrote: post #110

Earlier quoted context omitted.

And what good is a large population of people in their peak consumption years if they have no money with which to consume? So long as you have a low-paid workforce who have to save their money (either themselves or via insurance companies) in case they get an infected tooth or need to see a doctor for an antibiotic prescription, you'll have low consumption spending and low growth.

even medium to highly paid workforce members aren't entirely capable of spending en masse these days. I'd love to stop paying $3500/month in rent, but any property to buy around here has a median price of $1.2 million. Unless we all move to rural Indiana, housing + healthcare is designed to eat 100% of your after-tax income with no room for further growth. (of course, that's assuming you're just a putz serial employe…

In Portland, OR, my healthcare is 4% and my 2k+ house in the burbs (30 min commute) is At $3500/mo (about $750k house), there are over 500 house available right now[0] just in the actual city of Portland (not including suburbs). And that's just limiting it to 2bd 1.25ba (and above) detached houses (not including condos, duplexes, etc)

It's totally possible to work and live somewhere other than California.

[0] - https://www.redfin.com/city/30772/OR/Portland/filter#!uipt=1...

Re: Why Are Corporations Hoarding Trillions?

#162

Post by drzaiusapelord » Thu, Jan 21, 2016, 9:58 PM UTC

Animats wrote: post #88

The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…

Is this so bad? Falling into something of a European-type rut with permanent 8-12% unemployment and modest GDP gains? I remember the 90s. Everyone was buying shit non-stop. What kind of life is that? Sure it created jobs and growth but to the ludicrous end where we refused to accept the gravy train was ending. I remember Bush 43 pleading for Americans to "go back shopping" the black friday after 9/11 when the writing was finally on the wall. Its perverse.

I think if we want a shorter work-week, more holidays, and more leisure then we have to concede a bit on demand/buying shit. The endless race for growth eventually hits the laws of diminishing returns hard. Worst of all, automation is here in significant ways now. A lot of jobs are going to be gone forever with very limited new growth to make up for it. If I'm automating the responsibilities of hundreds of employees, I just don't see what can make up for it. A handful of devs, managers, sysadmins, etc can replace a significant number of jobs nowadays.

I think aging Western economies have a long adaptation process ahead of them to later stages capitalism and this is one of the first signs this move is now mandatory. How we handle automation, slow growth, etc will be the political fights of the future. We're already seeing some implementations of Guaranteed Minimum Income and other things completely unthinkable 30 years ago.

Re: Why Are Corporations Hoarding Trillions?

#163

Post by ryanlol » Thu, Jan 21, 2016, 9:58 PM UTC

n0us wrote: post #146

chatmasta wrote: post #69

I'm surprised nobody has mentioned the geopolitical advantages of hoarding cash. A big pile of untaxed, uninvested cash represents a significant political bargaining chip for the corporation in control of it. Apple can extract more from negotiations with the US government, for example, when it's holding $100b USD offshore. Quite simply, that money is leverage. Over the next several decades we will see the decline of…

Also leverage against other companies who might challenge their position. No one is going to take on Walmart knowing that Walmart has the cash to undercut them while operating at a loss indefinitely while they drive the upstart out of the market.

There's legislation to prevent that.

Re: Why Are Corporations Hoarding Trillions?

#164

Post by roymurdock » Thu, Jan 21, 2016, 9:58 PM UTC

Summary: Many large corporations in pharma, auto, tech are becoming net savers in order to (1) avoid the taxes associated with purchasing and maintaining new assets; (2) have a warchest of cash for M&A activity as cash deals are generally much cheaper than equity/debt deals, and M&A can be more cost-effective than R&D if done correctly.

Author is unconvinced that this covers the whole picture, and offers this meta-explanation: 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.

Simplified: there isn't enough promising new tech out there to soak up all of the cash in circulation. This is a common theme that has economists asking: what will be the 4th industrial revolution, and when will we see it? [1]

Is the cash hoarding good or bad? Author thinks good: If corporate leaders and their investors truly believed that the future were bleak, that innovation and economic growth were irreparably slowing, there would be little reason to hold on to all that cash. AKA that we are on the cusp of a new wave of innovation.

Personally I don't believe this matches up with leading business cycle indicators, such as the stock market, employment rates, and trends federal spending as a percentage of GDP. [2] But what do I know - there could be an R&D lab somewhere out there that is tantalizingly close to bringing the next paradigm-shifting technology to market. I'd love to know what that could be.

[1] http://www.nber.org/papers/w18315.pdf

[2] http://www.usgovernmentspending.com/recent_spending

Re: Why Are Corporations Hoarding Trillions?

#165

Post by Nrsolis » Thu, Jan 21, 2016, 9:59 PM UTC

tracker1 wrote: post #71

Nrsolis wrote: post #26

Earlier quoted context omitted.

Adding in another market distortion isn't going to help matters, you only create opportunities for people to game the system in an ever increasing effort to explore the law of unintended consequences. Those funds are held (usually) as US Treasury securities, or are at least hedged against any local currency risk, much the same way that any sovereign maintains a certain amount of foreign currency reserve. The most dir…

I'm not suggesting taking money from "evil" corporations... only in that money made in a locality should be taxed in that locality... getting rid of corporate 'income' taxes in favor of tariffs/vat and money exports would allow for that, with less opportunity for subverting the system, so to speak... At the end of the year, a tax refund could be given if you're a person, and transferred less than 100k out of the coun…

What makes you think that taxes aren't already being paid in the foreign jurisdictions?

This is a big part of the disconnect: if you (say, as Apple) sell a phone in Munich, you're paying the VAT tax in that country already.

Generally speaking, when you take the profits from your German sales back to the USA, in many (most, save a few exception) cases, you're going to pay corporate taxes on those profits now that they are repatriated back in the USA. So companies are incentivized to keep those profits in overseas jurisdictions to defer the US tax and reinvest in their overseas operations. Considering how much of their actual sales come from overseas, it's no wonder that they pursue this strategy.

EVEN IF a company wanted to be a "good US corporate citizen" and pay more taxes to the government, they'd be at a financial disadvantage to overseas companies doing business in the USA because THOSE companies DON'T have to pay tax on their overseas profits. That's why you see all of these companies set up in "corporate tax havens" that don't tax a single penny of offshore income. For one thing: it's damn easy to do international business through these companies because you effectively have a neutral ground from the perspective of finance. For another: you save money on taxes, allowing you to offer better terms to your customers and partners.

This kind of stuff only matters to the biggest corporations with multinational operations because the regulatory minefield associated with keeping track of laws and regs in lots of different countries is a nightmare and only a few top accounting firms have the talent to master it. Another reason why the law of unintended consequences shifts the tax burden to the little guy: he's not big enough to care about shifting his income overseas. When you create incentives by way of regulatory/tax arbitrage, you make it worth the while of a big multinational to invest the time and effort structure their deals so they take place in offshore jurisdictions.

Re: Why Are Corporations Hoarding Trillions?

#166

Post by tosseraccount » Thu, Jan 21, 2016, 10:00 PM UTC

2 reasons ...

"Economists ... showed in a 2009 article that the increase in the cash-to-assets ratio of firms was related tightly to precautionary motives."

"[a] second motive is present for multinational firms and is due to repatriation taxes. ... firms may have incentives to keep foreign earnings abroad. As a consequence, in times of limited foreign investment opportunities and high profitability, these funds are likely to be held abroad in the form of cash."

from https://www.stlouisfed.org/Publications/Regional-Economist/J... : Why Are Corporations Holding So Much Cash?

If I were to venture a third reason, it would be that with rising interest rates looming, the cost of borrowing will go up; which might be a subset of the 1st ("precautionary") explanation above.

Re: Why Are Corporations Hoarding Trillions?

#167

Post by drzaiusapelord » Thu, Jan 21, 2016, 10:02 PM UTC

npalli wrote: post #104

Animats wrote: post #88

The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…

> The US is out of demand How is the US out of demand? Peak consumption years of population are between twenties and fifties and the biggest cohort of US demographics - the millennials - is just getting started. They crossed over the Boomers last year and now are the largest group. Behind them the younger (Gen Z) equally large in size is ready to backfill in another 15 years. It is true that demand from Boomers is do…

Genx and y are hit pretty hard between increased taxes to take care of Boomer retirement entitlements, public sector union pensions and other 1970s deals coming to roost, and significant student debt. These are expenses the previous generations didn't have to worry about.

With a lower tax load and no student loan payments, my economic life would be fairly different. At least a second car, definitely more travel, nicer house, more random spending, etc. When we do hiring here I'm floored by how low entry-level salaries are for people with 4 year degrees and 1-4 years of work. Hell, we opened a coordinator level position recently and got resumes for people mid-career dying for work.

I think the economic picture isn't as pretty as some stats make it out to be. x, y, and z just won't have Boomer wealth and our economy must adapt to that. Its not the end of the world, but it won't be like the Clinton years again.

Also, there's a pretty rough calculation in regards to real estate prices vs income. A middle class income in the 70s got you a decent house with a reasonable percentage of your salary to pay for it. That relationship is kinda crazy now as high real estate prices have become the norm. I couldn't afford my parent's house I grew up in and I make 3 to 4x what they made. Fixed for inflation, I make easily 2x what they made.

Re: Why Are Corporations Hoarding Trillions?

#168

Post by secstate » Thu, Jan 21, 2016, 10:07 PM UTC

Animats wrote: post #128

partiallypro wrote: post #115

Earlier quoted context omitted.

That's not "trickle down" economics, which is not actually a real thing at all. That's a nonsensical political term that the Democrats seized upon during Reagan's "supply side" economic policy; which has beginnings much earlier than Reagan, and likely older than Jean-Baptiste Say's formulation. There isn't an idea that alone "capital drives growth," that's an idea that Keynes came up with by misreading Jean-Baptiste…

There is a school of economics, sometimes called the "freshwater school" (from the Chicago School and Milton Friedman) which claims you can't run out of demand. This is a classic position. But productivity is now so good that we can run out of demand. Classically, countries ran out of land, labor, capital, or management before they ran out of demand. There were occasional recessions, but that wasn't a permanent condi…

Not claiming I have a panacea here, but wouldn't either a more aggressive minimum wage or a basic minimum income raise the ability for more people to act on the desire to buy? I assure you the demand for tons of stuff exists, but the means to buy it does not.

Back in 2013, HuffPost ran an article pointing out that had minimum wage kept up with inflation, it would be $10.50/hr and actually more like $21 if it had kept up with productivity growth [0]. That, of course, assumes that the original minimum wage rate was set reasonably, but I can promise you that few people, save some well-educated counter-cutlurists, can live on $7.50/hr these days. And even if they could, they wouldn't really be spurring demand in the greater economy.

[0] http://www.huffingtonpost.com/2013/02/13/minimum-wage-produc...

Re: Why Are Corporations Hoarding Trillions?

#169

Post by drzaiusapelord » Thu, Jan 21, 2016, 10:09 PM UTC

crdoconnor wrote: post #138

koolba wrote: post #107

Earlier quoted context omitted.

> A modern "new deal" for elder care would also do the trick.. Oh please no! Boomers have already pillaged and mortgaged the futures of the youth enough already. The last thing we need is for them to stick it one more time with a new set of unpaid indefinite obligations. For a simpler approach, just give everybody $X (00 or 000?) either one off or repeatedly. It's as progressive as it gets and at least some youth wil…

If there's one thing that keeps surprising me about Americans, it's the ability to recite, with a straight face, the most blatant, self serving propaganda: https://fair.org/home/convincing-the-young-to-blame-the-old-... http://www.nakedcapitalism.com/2014/01/three-card-monte-gene...

Counterpoint:

Chicago pension crisis for retiring boomers.

https://www.illinoispolicy.org/chicagos-63-billion-debt-burd...

"When you include the city’s share of Cook County’s debt, Chicago’s total pension debt increases to $32 billion."

Rahm's Record $589M Property Tax Hike OK'd

https://www.dnainfo.com/chicago/20151028/downtown/record-pro...

Note, this tax increase just gets Chicago above water for 48 months. It does not remotely solve the problem. Chicagoans are expected to receive massive tax increases for years going forward.

"the mayor’s tax hike will be $1.9 billion short of the extra contributions needed through 2025."

http://www.illinoispolicy.org/mayor-emanuels-property-tax-hi...

Re: Why Are Corporations Hoarding Trillions?

#170

Post by Retric » Thu, Jan 21, 2016, 10:12 PM UTC

grahamburger wrote: post #135

jandrese wrote: post #94

Earlier quoted context omitted.

This is the ultimate problem with "trickle down" economics. Capital doesn't drive growth. Lack of capital limits growth, but excess capital doesn't generate additional growth. Demand drives growth and 35 years of stagnant wages (wages are basically where they were in 1981) have put a chokehold on growth. This is why you have the seemingly incongruous effect of high taxes encouraging growth and low taxes stifling it.…

> money ends up being redistributed somewhat equally, spurring demand as the poor can suddenly afford a lot more good and services. Does it? Maybe I'm just cynical but the idea of raising taxes on the wealthy sounds to me like just moving money from one set of rich white guys to another set of rich white guys. I vote one of them in to power at the local elementary school and the other every time I pull out my wallet.…

Government spending often involves a huge number of well paid workers. The phrase "Good enough for Government work." started because governments often have very high standards. ex: Compare accessibility on the web between government websites and startups. It's been diluted for various reasons that basically boil down to indirect corruption.

PS: One of the odd things is just how poor people used to be. Work minimum wage for 1 week and you can avoid starvation for ~1 year. Yet, people used to regularly starve.