Paul Krugman- Corporate Hoarding and the slow recovery

[n2doc]

Lots of talk now about Apple’s cash hoard, which is actually kind of amazing: this is supposedly our cutting-edge technology company, and it apparently can’t find things it wants to invest in. Or more accurately, given its incredible profits, it can’t find enough things to do with all the money it makes.

So, I’ve had a mild-mannered dispute with Joe Stiglitz over whether individual income inequality is retarding recovery right now; let me say, however, that I think there’s a very good case that the redistribution of income away from labor to corporate profits is very likely a big factor. Here’s corporate profits as a share of GDP:

So corporations are taking a much bigger slice of total income — and are showing little inclination either to redistribute that slice back to investors or to invest it in new equipment, software, etc.. Instead, they’re accumulating piles of cash.

How big a piece of the story is this? Stay tuned; I have to rush off

http://krugman.blogs.nytimes.com/2013/02/08/corporate-hoarding-and-the-slow-recovery/

[sagesnow]

1. When does this start trickling down?? n/t

[Yavin4]

2. Without Collective Bargaining, Labor is Powerless Against Corporations

Many people foolishly believe that their education/talent/skill set/etc. gives them leverage over the corps. which is absurd. Look at the talent level in professional sports and the entertainment industry. A fraction of the entire human population on planet earth have their talents. YET, professional athletes, actors, singers, dancers, etc. all belong to a guild or a union. What does that tell you?

[libtodeath]

3. This is sickening

people homeless and starving,repukes wanting to destroy safety nets and these companies sitting on mountains of cash.

[woo me with science]

4. K&R

[econoclast]

5. No such thing as a "cash hoard"

Krugman is an economist, not an accountant. So maybe he is unaware that there are two sides to a balance sheet. He SHOULD know that, buy hey, maybe in the ivory tower you don't need to concern yourself with such plebeian concepts as assets and liabilities.

But in the real world they matter.

Last time I checked - and admit it was about six, seven months ago - corporate holdings of cash and securities was about 1.7 trillion dollars. Corporate debt was about 7.2 trillion dollars. About 23.5% asset to liability ratio. Which has been remarkably stable over time. Almost exactly what it was in pre-crisis 2003.

So while there are more assets, so too are there more liabilities.

Moreover, these assets aren't Cash per se. Rather they are invested in short term paper be ut US Treasury bills or corporate paper from other corporations.

Savings = investment. And Krugman surely knows THAT. It is taught in every 101 economics course. So while Apple might decide to sell their assets and deploy the cash ... To do so, someone else must buy that paper from Apple. The net change in "cash on the sidelines" is zero.

The corporate "cash hoard" is financing the US govt deficit and the borrowing needs or other, cash poor corporarions.