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Why Are Corporations Hoarding Trillions?

nytimes.com

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Re: Why Are Corporations Hoarding Trillions?

#231

Post by ArkyBeagle »

secstate wrote: post #168
Animats wrote: post #128

Earlier quoted context omitted.

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…

Chances are that land rents and goods prices would adjust to soak up the gains in wages. No guarantees there, though.

Re: Why Are Corporations Hoarding Trillions?

#232

Post by rchaud »

sgt101 wrote: post #99
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…

I think it's a liability. The US government can at any time tax that cash, and if Apples execs refuse to pony up then they can have fun in jail. If the US government decide to do that....

>If the US government decide to do that....

And therein lies the rub. Apple can mount a better defense than the US prosecution can, by dint of their bottomless legal fund. Apple can also put forward a united front, whereas you would need to summon an unprecedented level of political will and bridge-building to simply prevent Congress from derailing the DOJ prosecution through infighting.

Re: Why Are Corporations Hoarding Trillions?

#233

Post by mc32 »

rchaud wrote: post #219
mc32 wrote: post #144

Earlier quoted context omitted.

Sadly, what we'll see happen is more automation, self checkout, etc. Technology will ensure low skilled workers price themselves out of the economy. This, js likely, to some degree, part of the force resulting in net negative low skills worker immigration. Too few skills (reading, maths) and now automation is coming to agriculture even fast food restaurants, and at $15 min wage, you can hire a high school dropout, if…

>part of the force resulting in net negative low skills worker immigration. That assumes that these workers are coming from countries where opportunities for paid work are equal to or better than those available in the US, and are equally lucrative. Many workers come from communities destroyed by the drug wars, or from economies ruined by corrupt governance. If those structural factors don't see improvement, the impa…

Understood, but if there is no market for their labor due to structural changes in the economy (automated taxis, automated check out, mechanized fruit picking) as well as a better educated domestic workforce (high school grads) now willing t work at $15/hr what jobs exactly would they be coming for?

Re: Why Are Corporations Hoarding Trillions?

#234

Post by altonzheng »

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…

I wonder if there are any schools of economics that don't view demand and growth as critical. So what if demand is low? This is definitely an oversimplification, but I'm wondering, what if that means people are satisfied with what they have. Is there inherently anything wrong in that? If we create a self-sustaining economy that doesn't grow much (but still evolves) it doesn't seem like such a problem to me. Culturally, I think we just assume growth = good.

Instead of trying to increase demand to match supply, what if we decreased supply, like having a four hour workweek?

Re: Why Are Corporations Hoarding Trillions?

#235

Post by refurb »

jganetsk wrote: post #204
secstate wrote: post #168

Earlier quoted context omitted.

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…

A basic minimum income is the right answer, but not for the purpose of increasing demand. People demanding to increase demand is utterly silly. We have succeeded as a civilization: we are providing far more than we could ask for. In the big picture, what does increasing demand really do for us? But there's definitely a need to reduce poverty. And there's a need to allow ourselves to stop working as hard as we do. A b…

We have succeeded as a civilization: we are providing far more than we could ask for.

Really? There is nothing you could improve in the human condition that would make life better?

Re: Why Are Corporations Hoarding Trillions?

#236

Post by tosseraccount »

wavefunction wrote: post #198
simonh wrote: post #55

Earlier quoted context omitted.

Not really. It's a bit partisan on tone, but the actual debt graph on this article is interesting. Basically there have been three big changes in direction for US national debt since WW2. Sharp upturns on Reagan and George W's watches, and a strong downturn under Clinton's. http://zfacts.com/p/318.html

At first blush I wonder if the downturn under Clinton's administration is related to reduced defense spending due to all the base closures during that time period.

And change of Congress in 1994.

Re: Why Are Corporations Hoarding Trillions?

#237

Post by Thriptic »

maxxxxx wrote: post #205
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…

Somewhen in the last decades the decision has been made that the majority of gains should go to the top earners. An easy way for demand to rise would be if wages didn't stagnate but went up with productivity. The top earners won't spend more money if you give them more. And new products won't be bought if no one can afford them.

Is this really feasible in a globalized economy? If wages were constantly forced higher wouldn't companies simply offshore increasing amounts of their labor or headquarter in another country?

Re: Why Are Corporations Hoarding Trillions?

#238

Post by rchaud »

armenarmen wrote: post #189
stickfigure wrote: post #187

If the companies spent their savings, rather than hoarding them, the economy would instantly grow, and we would most likely see more jobs with better pay. The article makes it sound like these dollars are somehow being removed from the economy. If they're put in a bank, the bank loans it out to someone else. If they buy treasury bills, the government then takes the money and spends it. Even if all this money was conv…

> If they're put in a bank, the bank loans it out to someone else. If they buy treasury bills, the government then takes the money and spends it. good call, this is Econ 101 stuff that most people just don't know. Saving money in a bank or government bonds is not the same as locking it in a vault or burying it in your backyard. It is still out moving around in the economy.

While the article certainly worded that portion poorly, there is a difference between monetary velocity of retained earnings parked in a mutual fund, and earnings plowed back into a business. In the former scenario, it takes a much longer time for the money to flow back into the purchase of goods and services. By reinvesting in the business, there is far less of a time lag for that to result in growth-generating economic activity.

Re: Why Are Corporations Hoarding Trillions?

#239

Post by charlesdm »

jmorrow977 wrote: post #183
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.…

I'm coming around to the opinion that taxes on income are a bad idea. Income flows to people as they're trying to accumulate wealth, trying to climb from lower to middle to upper class. Higher taxes on income, especially highly progressive taxes, make it harder for people to move between social classes. The focus on income tax creates a situation where the person who makes $200k/yr but has a net worth of $0 gets taxe…

I'm all for higher taxes on capital, maybe with some exceptions on the amount of capital gains tax to pay on your first €10m. But honestly, a wealth tax is just demotivating. Not every wealthy person invests their new found riches. It makes sense only to tax gains from investments, but only gains. Not making money on your capital? No problem, you don't pay. If you are, you do pay extra tax. I don't even think it's a bad idea to group income and capital gains together, as long as you can offset losses from capital against taxes on income.

Second point against a pure wealth tax: some of that wealth might be tied up in very illiquid assets (say, a castle worth €20m), meaning you might not be able to keep them because you have to pay the annual wealth tax. Or in say, art, which can be highly volatile in its valuation. This will automatically lead to disputes with tax authorities about valuations, etc etc. Not exactly fun to deal with + it's hard to enforce/verify

Re: Why Are Corporations Hoarding Trillions?

#240

Post by rchaud »

apaprocki wrote: post #8
vinceguidry wrote: post #7

Investing money is work. You have to sink resources into it. If you don't, then you will assuredly lose that money. A guaranteed return is better than an assured loss.

Holding cash is essentially an investment in the sovereign government that controls that currency. Simply sitting on cash does not imply little or no risk.

They are not sitting on the cash. The article worded this very poorly. While all companies hold cash for managing day to day operations, a lot of the 2 trillion or whatever the number is, is parked in CDs, Treasuries, Bonds, etc. i.e., income-generating investments. Financial statements require companies to disclose "Cash and Cash Equivalents"; much of the hoarded money is in the form of investments that can be quickly converted to cash. It would be foolish to simply park non-essential funds in a savings account making 1%/yr.
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