Today's Coming Crisis Movie

Thursday, March 1, 2012

Capitalism On Strike – Why Corporations Are Hoarding Cash: Mark Spitznagel

Corporations, today, are holding the largest amounts of cash, relative to assets and net worth, ever recorded. The velocity of money (the frequency at which money is spent, or GDP relative to base money) also continues to plunge to historic lows. But why are companies deciding to hoard cash, when more capital investment is needed to stir economic growth?

LOS ANGELES – Capitalism’s greatest strength has been its resiliency – its ability to survive the throes and challenges of crises and business cycles to fuel innovation and economic growth. Today, however, more than four years into a credit crisis, a conspicuous enigma calls this legacy into question.
See the Slide Show >>> American Companies Sitting Atop A Pile Of Cash

Despite recent hopes of recovery in the US, including an inventory catch-up in the fourth quarter of 2011, real US GDP growth has remained persistently below trend. Moreover, although seasonally adjusted January employment data have brought the unemployment rate down to 8.3 percent (while total jobs were actually lost in January), the more realistic rate of “underemployment” remains over 15 percent and the labour-force participation rate is at a record 30-year low. And the US is clearly not alone in its malaise, with the eurozone fighting a far more urgent sovereign-debt crisis. Read More