While Credit Suisse (NYSE:CS) and the Federal Reserve on correct on their conclusion that corporate America isn't spending, they're wrong in their conclusions as to why.
Neal Soss, chief economist at Credit Suisse, wrote in a note to clients, “The persistent accumulation of cash, as opposed to investment in new equipment and technologies, is not conducive to long-term growth. And if businesses aren’t growing, they certainly will not be expanding their payrolls fast enough to drive down the country’s worrisome unemployment rate.”
Soss concludes “[I]t is difficult to be persuaded by accusations of generalized corporate greed. Rather, we attribute the hesistancy of American firms to spend larger percentages of their cash flow mainly on an extremely rare and powerful money demand shock that encompassed the nation during the Great Recession.”
The idea of greed doesn't even make sense, as anyone that has run a business knows if there is opportunity a business will invest.
There is nothing more to this than the fact that there is no reason to spend money. The idea of businesses spending money in order to generate attempt to create a recovery is a governmental and socialist idea, not one a business would even think of.
In other words, businesses aren't spending because there isn't something out there they're confident will bring them a return on their investment.
If there was, they would be spending money. That's why the idea we're in a recovery is a joke. Just because the share prices of companies are bid up doesn't mean in any way the economy is growing. All that has to do with is investors and traders believing the companies will grow, not that it is a fact that they are growing.
No comments:
Post a Comment