Canadian companies have piled up more than $525-billion in cash reserves – almost a third the size of the entire economy – up from little more than $150-billion a decade earlier. According to a recent analysis by the Gandalf Group, at least 45 per cent of Canada’s biggest companies are hoarding cash rather than investing in employment or capital....
That’s nothing compared to the United States, where the Federal Reserve estimates that a staggering $5.1-trillion – an amount larger than the economy of Germany – is piling up in American corporate cash holdings.
In Britain, companies have accumulated almost $1.2-trillion in cash and deposits, equivalent to half the entire economy. And, no surprise, investment there grew by only 1.2 per cent last year, during what was supposedly a recovery. Indeed, it appears this frugality has tipped Britain into another recession. And this pattern sadly extends across Europe.
(This quote is from a piece by Doug Saunders, about the mounting "stashes of cash" accumulating around the world, included for readers below.)
Columnists, politicians, and bankers, along with corporate executives and all those engaged in the generating of eonomic activity and the conditions that promote or hinder economic activity will have to stop calling the situation either a debt or a deficit crisis, or even an unemployment crisis.
This behaviour is nothing short of an immature, narcissistic demonstration of passive-aggressive neurotic terrorism. If this were happening in a family, the family would be seeking support in the form of either family therapy or a court order. There seems to be a kind of passive-aggressive terrorism, inflicted by those hoarding what Saunders calls "mountains of cash" while they demand "certainty" through clear rules and regulation, that can only be arrived at through political compromise, an ingredient that the political operatives of these "hoarders" categorically refuse to accede to, to consider, and certainly to provide.
There is now, according to the evidence presented in Saunders' piece, a new gated community, above the law because it is outside the law, connected through digital technology and through the use of the same consultants and 'brain trust' and employing a cadre of tax lawyers and accountants that keep these hoarders 'just a hair's breadth' from criminal complicity. The gates are up on the new community of this range of mountains filled with cash, with their own security department, their own "have" culture and their own minimal, "public conscience" in a trickle of funds to an appointed and publicly advertised charity that provides a veneer of respectability.
Meanwhile, the profit motive for these hoarders is being met through the dividends they 'clip' from their shares, and the "social accountability" phase of their businesses, in the form of employment, investment in capital and equipment thereby generating employment and economic activity for a broad range of "others", has literally dried up, leaving the rest of the economy, the "have-nots," staggering into the ditch of poverty, hopelessness and eventually despair.
This divide is like two tectonic plates, one moving the other static, as if those plates were disconnected, and the movement of one would not impact the static condition of the other. The force of the "have" plate is, at this moment, having a much greater impact on the static plate, than the reverse.
However, this is another example of extremely short-sighted vision of fear, on one hand, and its corrolorary, the bully, on the other.
Arguing that "we don't know what the conditions will be in a year or two so we can't invest with any degree of security and confidence that those investments will prove 'wise'" is merely another public relations scam for the word's, "We are going to hold the economy hostage unless and until we have our chosen political leaders, who believe in the sanctity of the corporate state and its need for complete control of the levers of power, the regulations on taxes, and the size of government, (and whose numbers include all those American Republicans who have already signed the "pledge" not to raise taxes) and we are effectively determined to tranform the world's economy into our instrument, since government has proven itself unable to govern!"
In a marriage, if and when one partner refuses to engage with the other, and disengages from activities that formerly both enjoyed together, including intimacy, there are no bruises, and not even any open disagreements, only the party "left out" grows increasingly weak, his or her commitment to the relationship atrophies, and often the "left out" partner degenerates into some form of compensating behaviour like alcohol, to kill the pain of the estrangement. That is, until there is a complete divorce and an ugly dividing of the residue of the matromonial home.
However, when the corporations collectively hold the many states hostage to their control, and the political operatives have already surrendered their political activities to the funding control of those same "have" leaders, the other partner in the social contract, the workers, the middle class families whose only hope and dream included the capacity to make a decent living and to live in a decent home and to educate their children to the extent of their ability, soon become the "left out" partner in the contract. And the atrophy of those families, and their potential to give to the broader economy withers and dies with the death of their opportunities.
And it is much more than a legal contract.
It is a culture in which, not only is profit made by the corporations, but in that process those corporations provide decent wages, working conditions, and in some countries benefits like pensions, health care and unemployment insurance to eass the shock in the event of changes in the operating conditions of the corporation.
Clearly, the working conditions, wages, pensions and job security have all disappeared. And along with those attributes of the health workplace, all forms of worker organization, especially labour unions, have disappeared. And, with both labour and the political sector "emasculated" (and this has been a deliberate and sustained campaign, conducted through the collusion of those same corporate "suits") now the field is empty of any roadblocks to the activity of the managers of these mountains of cash.
Governments have no legitimate income, based on a reasonable tax on corporate profits, those profits having already been shifted offshore to countries where they pay no tax, and the original head office country is unable to retrieve what formerly were legitimate and reasonable revenue from the corporate sources. And without income, governments are increasingly defaulting on debt, and generating mountains of deficit, while, on the other side of the ledger, the cash sits idle in the bank accounts of the countries with little or no tax, given their co-dependent slide into complicity with the very rich, as a veneer of marketing respectability, for other very rich to visit, and drop their unwanted cash.
And what is happening, at a pace too fast to provide legal restraints, is that the world's economy is becoming the solitary "board game" (read Monopoly) of the corporations, while governments literally atrophy through the lack of blood and oxygen necessary to sustain their life and the programs that would both support the indigent and restrain the voraciousness of the corporations. And how long will such a ruse be permitted until the 99% take back the governments first, and then deploy the agents who have enough confidence to confront the corporate magnates, whose malfeasance has, for the most part, been the primary agency of the credit crisis and the economic depression that descended in 2008, and its impact continues?
The public needs an army of Ralph Nader's, Chris Hedges, Jeffrey Sachs, and yes, Barack Obama's, and Christine Lagarde's and other world leaders who can see what is happening and who can mount a concerted campaign to counter the greed, narcissism and exclusivity of the corporate "cabal" and provide the arguments and the confidence and the necessary artillery to take back the governments by the people.
And Canada is clearly one of those countries slipping inexorably into the corporate camp.
By Doug Saunders The Globe and Mail, July 21 2012
We’re still calling it a “debt crisis.” And when we feel the jobs sweeping away and the cold hand of stagnation choking off the economy and threatening recession, we tend to search for an explanation by peering into the bottomless pit of debt.
But in most parts of the world, including Canada, debt is not the major problem. That was four years ago. Today, a far bigger threat is pouring down from atop the most prominent and least remarked-upon new addition to our financial landscape: all those teetering mountains of cash.
The cash pinnacles are far higher and more numerous than the debt canyons, and their damage more tangible. Never before in the history of the world has so much cash been hoarded in so many places by so many large organizations. Never before have so many opportunities been missed, so many careers wasted, because money is simply being put aside.
The cash hoards are a consequence of the debt crisis, but that is no longer a credible excuse. Before 2008, companies loaded themselves with debt. Then, in the worst months of the “credit crunch,” when overnight interest rates shot upward and banks stopped lending, companies packed their bank accounts in case credit dried up completely.
Canadian companies have piled up more than $525-billion in cash reserves – almost a third the size of the entire economy – up from little more than $150-billion a decade earlier. According to a recent analysis by the Gandalf Group, at least 45 per cent of Canada’s biggest companies are hoarding cash rather than investing in employment or capital.
None of it is going into research and development, expansion of market share, new offices and factories or, crucially, on employing people. Nor is it going into tax revenues, since cash reserves – and some of the earnings that contribute to them – escape the taxman, giving companies an incentive to not invest.
c“Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list,” warns Peter Spencer, a British analyst with Ernst & Young.
It’s strange, because this should be a great time for companies to invest: low prices, low interest rates, cheaper labour costs. A sensible company would build up cash during boom times – when investments are more expensive – and spend it during recessions, when consumer demand is weak and capital is cheap.
Yet this is the precise opposite of what actually happens. Companies look at the low consumer demand and become terrified, failing to recognize their own role in creating it.
This has become a public issue. There are some very important reasons why we need investment and spending now – and why chopping down the cash mountains should come before filling in the debt pits.
Unemployment is threatening to cripple an entire generation in many countries. The worldwide food crisis has returned, for no good reason; with more investment, the world could produce more than enough food. There are serious housing shortages in most Western countries. The drive to reduce carbon emissions has stalled, due to a shortage of investment in nuclear and alternative-energy power sources.
If the economy doesn’t start moving, there is something else we could do: start taxing those cash reserves – especially those held overseas. If we make hoarding expensive, companies will find it more desirable to use earnings to increase market share, improve products through research or expand into new markets.
The sinking U.S. dollar and untrustworthy euro have helped: Suddenly, low-return investments, such as African infrastructure, are more appealing than cash in the bank. Governments like China’s see this now. A tax could make companies see it, too.
And if they don’t, then governments will get a bit of cash from them to plug into their debt holes. Nature may abhor a vacuum, but it’s equally opposed to a teetering heap.