Tuesday, July 13, 2010

Business Cash Hoarding

Companies are sitting on a record almost $1.8 trillion in cash and liquid assets.  Why won't they invest that money in expansion and hiring?  The standard answer is that business fears the uncertainty of higher taxes, new medical rules, and burdensome regulations.  Is this true?

The following chart shows that cash hoarding has been steadily rising since 1983, undergoing temporary downturns in the late 1980s and 2005-08.  During these these 27 years, uncertainty fluctuated, but the trend line remained upward.  (HT:  Barry Ritholtz)


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