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Fear and Loathing In America
Was it urging firms to take advantage of lower natural gas prices?
Or suggesting businesses grow by acquiring foreign firms with the strong dollar?
How about lowering prices to cash-strapped consumers?
Nope. None of the above.
The top recommendation was for firms to hold onto their cash. And I quote:
“Stay liquid. Protection of principle and liquidity trump all. You can’t rely on the capital markets to be there when you need them.”
Sounds like a ringing endorsement of the economy to me. And the cow jumped over the moon.
But just how negative is the view of major US firms’ outlook on the economy?
Firms fear the future
According to the Federal Reserve, “nonfinancial companies continue to hold unprecedented levels of liquid assets, $1.74 trillion at the end of March.”
That’s a lot of liquidity. More importantly, that’s a lot of fear.
And let’s get down to it, shall we? In the political realm, there is a lot of wiggle room where a lot of rhetorical fertilizer gets spread around and peddled as fact by those whose job it is to do so.
But when you’re a CFO of a major firm, there’s no room such nonsense. The only concern is to know what the reality is and to prepare for its impact. Otherwise, you’re out of business.
On the one hand, there is political finger painting targeted toward its juvenile audience who believe in the rhetoric of hope and change, and on the other, the hard reality of survival in High Definition.
Get the picture?
You should, because the picture is crystal clear. There is no confidence in this administration to fix the economy; hell, there’s no confidence that this administration even knows what an economy is or how it works.
“Ah, but that’s just your political bias showing, JRG,” you might say, but I think not.
Admittedly I am no fan of this administration…
I tend to chafe at those, whomever they may be, who think they know best how you or I should run our lives while taking the majority of our hard-earned money in the process.
That’s why it’s so amusing, if not disgusting, to hear those who’ve never, ever run a company in their entire lives, deign to provide us with such idiotic advice.
Blaming firms for not spending
Case in point: the President and his powerful union bedfellows whining and berating American firms for not spending more money to create jobs.
And therein lies the problem…
The belief that spending money, whether by government or by business, creates jobs.
Unfortunately, spending money does not create jobs. Not real ones, anyway. If that were the case, then with all the trillions of dollars that have been spent, the economy would be awash in jobs, falling unemployment, and rising wages. But it’s not, is it?
Jobs are created by demand.
Demand is created by consumers earning money working at real jobs that produce goods and services for their fellow consumers…at least that’s how it used to work in America, back when the middle class was, well, the middle class.
But why cloud the issue with facts?
At the same time, the President is busy creating as many new regulations and taxes—two things that kill economic activity, the very thing he says he wants more of--as fast as he can.
And the institutionalization of Obamacare by the Supreme Court last week has only underscored the trend toward economic malaise in this country.
The public may be stupid; and the Supreme Court may be short sighted, but business owners are neither, or they’re not business owners for very long.
They deal with facts, not political spin or ideological arm-twisting. Business people see what’s coming and are preparing for it. The facts are that fear and uncertainty are driving businesses to hoard cash. And why shouldn’t they?
The level of uncertainty in the economy is quite high, while confidence in the Administration’s ability to solve it dwell at the bottom of a very deep, dark hole.
The Obamanization of America
For many, the expectation is that it could take years before the economy turns around. That estimate may be extended, of course, depending upon who is running the country in 2013.
But even that may not change things for a long while.
American firms know that such a reality is not good for business. In fact, S&P 500 companies are holding 70 weeks’ worth of net operating cash, an unprecedented level of cash hoarding, which is earning those companies almost nothing.
Think about that for a moment. Huge firms are not in the business of earning nothing on their money, but the view ahead compels them to do so.
Why is this happening?
There is of course the Eurozone problems and the global slowdown in general, but that doesn’t entirely explain the dropping domestic demand in our own economy.
The Obamanization of America, where the final transition to a centrally planned economy has put the last brick on the broken back of what once was a thriving middle class.
There is no mystery here; there is only economic hardship by design and the predictable degradation of the economy.
The absolute loathing that this president feels toward “the American way” has found its voice in polices that have turned the middle class into an entitlement-dependent class of workers who just want to hold onto what’s left. They’re not spending money that they don’t have, and certainly won’t have, in the foreseeable future.
American firms understand this.
American exceptionalism, economic dynamism, and the rest of those ideas that this President has so effectively attacked while in office, have been marginalized. They have been replaced by the planned and command economic malaise we have today, and will have more of tomorrow, where “advanced nations,” apparently, ought to be.
That’s the reality behind all that cash, over $1,7 trillion, that is earning nothing.
And those are…The Gorrie Details.