Why Are Corporations Hoarding Trillions? • Hacker News Board

Re: Why Are Corporations Hoarding Trillions?

#31

Post by zanny » Thu, Jan 21, 2016, 4:02 PM UTC

tracker1 wrote: post #5

I've often said that the key to improving investment is to eliminate corporate taxes, tax foreign currency movements (when money moves out of the country), and to put limits on the amount of unutilized/under-utilized assets a corporation can hold onto, and for how long. Corporations better serve the public good when they are spending, and beyond that spending domestically. By shifting funds out of the country and/or…

If you want corporations acting in the public good, form Public Benefit Companies[1]. Until then, there is no reason to sacrifice shareholder confidence or profit potential to make the world a better place.

[1]: https://en.wikipedia.org/wiki/Public-benefit_corporation

Re: Why Are Corporations Hoarding Trillions?

#32

Post by tomp » Thu, Jan 21, 2016, 4:02 PM UTC

ksdale wrote: post #22

Theoretically the value of all that cash should be baked into the share price. If shareholders think they can better invest the money, they can sell their shares take their money elsewhere, and only have to pay capital gains tax. If the companies repatriate the cash, they have to pay tax right now which eats up a substantial percentage. Then they still have to find something to do with the cash. If they pay it out to…

By this logic, every dollar abroad should be worth only 50 cent in the price of a share - after all, that's the real value of that cash after all taxes (contrasted to the accounting value of the dollars on the companies' annual report).

Re: Why Are Corporations Hoarding Trillions?

#33

Post by maxerickson » Thu, Jan 21, 2016, 4:03 PM UTC

l3m0ndr0p wrote: post #21

tracker1 wrote: post #5

I've often said that the key to improving investment is to eliminate corporate taxes, tax foreign currency movements (when money moves out of the country), and to put limits on the amount of unutilized/under-utilized assets a corporation can hold onto, and for how long. Corporations better serve the public good when they are spending, and beyond that spending domestically. By shifting funds out of the country and/or…

This is incorrect: "Corporations are meant to serve the public good by encouraging investment and limiting liability of investors not involved in decision making" Corporations are meant to do one thing, make money for the share holders at any cost, by not breaking laws or not being caught breaking laws (or rewrite them). Corporate behavior today reflects this. The key to improving investment is to prevent corporation…

The comment you replied to isn't saying that all corporations serve the public good, it is saying that the grant of limited liability only makes sense if corporations in general end up being beneficial. If they aren't beneficial, we should stop granting investors limited liability.

Re: Why Are Corporations Hoarding Trillions?

#34

Post by forgetsusername » Thu, Jan 21, 2016, 4:03 PM UTC

golergka wrote: post #11

What the CEO and upper management of these corporations say about this? Surely, they were asked about this by shareholders?

>Surely, they were asked about this by shareholders?

Except it's the hot, new Silicon Valley thing to structure your company as to not give your shareholders any power or voting rights.

Re: Why Are Corporations Hoarding Trillions?

#35

Post by simonh » Thu, Jan 21, 2016, 4:04 PM UTC

tracker1 wrote: post #5

I've often said that the key to improving investment is to eliminate corporate taxes, tax foreign currency movements (when money moves out of the country), and to put limits on the amount of unutilized/under-utilized assets a corporation can hold onto, and for how long. Corporations better serve the public good when they are spending, and beyond that spending domestically. By shifting funds out of the country and/or…

Currency controls (taxing money movements out of a country) have serious problems. Foreign investment would dry up because they won't want any profits or capital gains taxed on exit. Domestic firms will suffer a severe penalty on trying to invest abroad, giving foreign companies that can a big competitive advantage. Buying foreign stuff would become more expensive, so the cost of foreign made goods would shoot up, also the cost of imported parts and commodities for local industries would rocket, killing domestic industry competitiveness. You'd have to also tax assets and goods moved abroad because otherwise people would buy stuff locally and sell it abroad as a tax dodge. Basically your whole economy would become massively distorted.

Re: Why Are Corporations Hoarding Trillions?

#36

Post by phkahler » Thu, Jan 21, 2016, 4:04 PM UTC

The economy grows and you get inflation when interest rates are lowered. It shrinks and you are likely to get deflation when rates are raised. The rate lever was getting reduced over the last 30 years and is not at zero. Anyone can see the only way for rates to go is up, and the value of cash is likely to increase in the near future. I honestly don't see any need for mystery in that.

There's also the notion that a companies stock price should be tied to its dividends, or at the very least it's ability to pay a dividend. If you want to buy low/sell high, you're assuming you are smarter than other people. If you want to buy and get income from dividends/profits you are a more realistic investor and will be interested in the P/E ratio. A hoard of cash is going to help stabilize the stock price - market cap should never fall below the value of the assets.

Re: Why Are Corporations Hoarding Trillions?

#37

Post by jameshart » Thu, Jan 21, 2016, 4:04 PM UTC

bobby_9x wrote: post #2

It's the same reason I save my money: for opportunities when prices are low. This is especially relevant now that the stock market is tanking. Most people with any kind of money think this way.

When everybody is thinking that way about capital purchases, you get a deflationary spiral...

Re: Why Are Corporations Hoarding Trillions?

#38

Post by vetinari » Thu, Jan 21, 2016, 4:05 PM UTC

forgetsusername wrote: post #28

mratzloff wrote: post #16

Earlier quoted context omitted.

Trillion. Here's a chart of debt as a proportion of GDP: http://dailyreckoning.com/dr-content/uploads/2015/06/Histori...

Why is it that people always talk about only one side of the accounting ledger? The US has a net worth of nearly $150 trillion dollars. Who cares about the absolute value of debt?

That $150 trillion - is that book value, or fair value?

Re: Why Are Corporations Hoarding Trillions?

#39

Post by zanny » Thu, Jan 21, 2016, 4:05 PM UTC

forgetsusername wrote: post #28

mratzloff wrote: post #16

Earlier quoted context omitted.

Trillion. Here's a chart of debt as a proportion of GDP: http://dailyreckoning.com/dr-content/uploads/2015/06/Histori...

Why is it that people always talk about only one side of the accounting ledger? The US has a net worth of nearly $150 trillion dollars. Who cares about the absolute value of debt?

That's not absolute debt, that is debt relative to GDP as a percentage. Its a measure of, effectively, how long it would take the US to pay off its debt if it forced itself to operate in the green, since there is a limit on how much you can tax out of an economy without causing it to contract, and GDP is a flawed but relative measure of what you can potentially tax.

Re: Why Are Corporations Hoarding Trillions?

#40

Post by Scea91 » Thu, Jan 21, 2016, 4:08 PM UTC

jimrandomh wrote: post #23

mschuster91 wrote: post #12

> Remarkably, the United States government was able to tax all that productive corporate behavior so much that it came close to paying off all its debts for the first time in 160 years. The current US debt is over 18.900.000.000.000 $ ( http://www.usdebtclock.org/# ). Am I getting the author right that the US managed to put on 18 B $ in 20 years?!

No. In the 90s, there was a brief period where the US managed to not have a deficit (ie, it was taking in as much as it was spending). The US has never eliminated its debt, nor should it; that would essentially mean withdrawing the US dollar from circulation.

How? If they owe you 10 $ and they pay you 10 $ it doesn't seem like the 10 $ got withdrawn. Quite the opposite actually.