There’s a breakthrough story on the front of today’s New York Times that finally acknowledges two big problems with the economy that we’ve been writing about for months.
First, I’ve been complaining about big companies hoarding cash since last summer.
Just last week Jen Stryker touched on the same theme, explaining why consumers can’t rescue this recovery, but cash-rich companies can.
In a story headlined “Easy Borrowing By Corporations Spurs Few Jobs”, the Times explains how companies are using ultra-low interest rates created by the Federal Reserve to borrow billions of dollars they’re just stuffing into the mattress.
Few “of them are actually spending money on new factories, equipment or jobs. Instead, they are stockpiling the cash until the economy improves,” the Times says.
“The development presents something of a chicken-and-egg situation: Corporations keep savings, waiting for the economy to perk-up – but the economy is unlikely to perk up if corporations keep saving.”
Then the Times finally acknowledges something that the mainstream media has ignored ever since the financial crisis struck nearly two years ago.
“The Fed’s low rates have in fact hurt many Americans, especially retirees whose incomes from savings have fallen substantially,” the story says.
We’ve been screaming about that for months.
So here’s what needs to happen:
- The Fed needs to ease up on its radical market distorting policies and allow interest rates to rise at least a little back towards reasonable rates.
- Corporations sitting on a big pile of cash need to significantly boost their dividends and give that money to their shareholders. If they won’t spend it, we will.