And this from Economix:
The dividend push comes as companies sit on an ever-growing pile of cash, with non-financial companies in the S&P 500 holding $1 trillion in cash or like assets at the end of the second quarter, according to Banc of America Securities LLC analyst Jeffrey Rosenberg. By one estimate, that cash level could rise to $2 trillion by the end of the year.
Of course the best evidence for excess money demand is the sustained decline in the velocity of money:“Not only are we seeing a tremendous V-shaped recovery in corporate profits, but we are in fact seeing the biggest corporate profit recovery ever,” said Joseph A. LaVorgna, the chief United States economist at Deutsche Bank. “That means that the equity market is dirt cheap. That also means that companies have more money than they know what to do with.” Meanwhile,.... unemployment rate is still stuck at 9.6 percent.
yep. "companies have more money than they know what to do with"ReplyDelete
so exactly how is QE supposed to help that?
You need to take into account increased debt at corporations -- it wipes away most of the excess cash.ReplyDelete
See this post: http://macromarketmusings.blogspot.com/2010/11/memo-to-fed-fix-aggregate-demand.html
For every debtor there must be a creditor. Thus, even if there are indebted firms there are other creditor firms, households, banks, etc. that are receiving payments from the debtors and are sitting on the money. There is no other way to account for the decline in money velocity or the sustained fall in the dolalr size of the economy. QE2 is about getting those creditors to all start spending their money (i.e. eliminate the excess momey demand problem)
david, i saw that post, remember?ReplyDelete
it was i that made the point in comments there that companies have more money than they know what to do with...
& its all going overseas now...