Akvod said:
Kasz216 said:
Akvod said:
Kasz216 said:
Akvod said:
Kasz216 said:
Akvod said:
Kasz216 said:
I mean, actually the biggest problem the US faces right now is that the US companies have made some huge profits but aren't reinvesting that. While it's fun to just blame the big faceless corporations, a better question is... wh
Uncertanity to make a profit/uncertantity about costs of obama's healthcare plan/uncertanity of their tax rates.
Plenty of money is sitting out of the economy because of this. |
No. Uncertainty of demand, difficulty of obtaining finance, and increased risk of financial distress are the main reasons why they are holding cash.
Even if we were to accept fear of taxes as a reason, they're not as huge as the three reasons I've listed.
Enough with the conspiracies.
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You seem to be the one with the conspiracies.
Why is it difficult to obtain finance when banks are having huge comebeacks and rapid profits?
Uncertainty of demand... that sounds a lot like uncertaitnty of profit to me? Which you know, is the focal point against stimulus, government stimulus isn't real demand, so instead it just cloggs up the money into buisnesses that hold on to it for real demand?
Increased risk of financial distress... so... what's the point of the stimulus again... if all this money is just going to end up in buisnesses hands that won't spend it.
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1) Because demand is uncertain and the economy is depressed? Demand uncertainity = Cash flow uncertainity.
2) I really don't see your point. We can disagree what the government should do when there's uncertainity of demand, but the point is that people are less willing to spend and now firms have to deleverage because cash flows are uncertain.
3) I mean, you have to take financial theory with a grain of salt, but firms don't just horde cash for the sake of hording cash. If you gave a firm a trillion dollars, hypothetically, they aren't just going to horde it all. They'll probably distribute a lot of it as dividends or repurchase shares. So no, firms aren't going to hold infinite amounts of money. Firms are deleveraging though, because, like I said, there's higher uncertainity in demand, and because getting external financing is more expensive.
It might not be as simple and feel good as "it's big bad government's fault", but the reality is simple. Firms are deleveraging because it's more expensive to borrow money and it's more risky to have debt in the current economic environment.
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1) So, you can't get a loan because of the situations I mentioned, thereofre you can't get a loan, and the problem is you can't get a loan. Companies would be willing to invest a bit if they had any idea what to expect next year.
Nevermind the Voelkler rule which by law is going to force way more cash reserves.
2) Well first, your central arguement is that governments need to spend to create growth, yet you are argueing growth isn't occuring because of uncertainty in the face of government spending. Your arguement here completely defeats your overlying premise above.
3) Economic theories, much like scientific theories eventually have to fall to the wayside when in contradicts the observable facts. In general there is a HUGE gap between educational economists and practical economists. Educational economists tend to ask the "wrong" questions.
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1) Wha-wha-what? You repeated the same thing three times.
You can get a loan, just not for as much as you want and for low rates, nor quickly.
Companies will be willing to invest if there were investment opportunities. But in order to have such an opportunity you need to have DEMAND. Otherwise, it's a negative NPV investment.
As for cash reserves, I'm not really knowledgeable on the legislation, but isn't it mainly targeted towards banks?
2) Regardless of what we believe the effects of government spending is, my point is that firms are not spending because of the uncertainty behind consumer demand and the global economy (e.g. what if the EU collapses). I have no idea what you think I was saying, but whatever you have in your head is wrong.
3) Okay, so you're essentially taking a nihilist argument then. Nothing's right. Well, except for what you think.
I mean, common fucking sense. Why would you hold money if you're going to get taxed more? So the government can grab more of it?
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1) The Voelkler rule is targeted at banks, it is, which is why banks aren't lending out as much as they would be... however in general banks report actually not fufilling as many loans as they'd like.
Keep in mind though... we are mostly talking about companies that don't even really need loans. They're sitting on cash reservse.
2) Except the economy has slowly improved despite europe pretty much being hopeless this entire time. After a while europeon risk is just priced in to operating procedures and people say "It's now or never." Except they haven't because there is other risk that can't be quantified.
3) The point was, companies aren't doing anything with their money. Saying economic theory says they won't doesn't mean a whole lot when they are.
It's like argueing that biological theory says a bear won't eat a person so you should relax, when the guy next to you is having his leg eaten by a bear.
You seem to be ignoring the fact that the taxations being proposed are of two kinds....
A) An alternative minium tax targeted at investments. Make a certain amount of money in investments and now you have to pay the same rate as a middle class family would if they had that cash on hand. Oh, also there is the whole risk factor of your investments bombing.
B) A tax based on the number of employees you have. Meaning the tax, will be based on how many employees you have/how much their healthcare will cost (complete unknown after this law healthcare goes into effect.)
Also in general 57% of companies cash are in overseas accounts that are free from US Taxation. You can hold money there tax free, and just bring it back whenever and pay a one time repatriation fee... guess your professor hasn't gotten to that yet.
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1) Companies need the cash, because of the risk of bankruptcy. Banks aren't lending because it's risky.
2) More like flatlining. And what countries ended up doing worse? The countries that enacted austerity measures. Ice Land ought to be doing shitty now, right? Wrong.
3) Companies aren't spending money because there's nothing to spend money on, and because it's hard to get money (even if they have it on hand, it's all in terms of opportunity costs of capital, so it doesn't really matter).
From my perspective, you've been simply saying "it's all government's fault", whereas I'm putting up some pretty common sense answers here.
A) Has to do with personal investors. Not with corporations holding cash.
B) Need to do more research on the legislation myself.
C) Tax rules and laws are really complicated. I don't think you and I should really argue about it since we'll be talking out of our asses. There's a reason tax accountants and specialists are paid a ton of money.
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1) Except... these companies aren't in risk of bankruptcy. Apple needs 100 billion in cash because it's going to go bankrupt? We're talking about healthy companies with excess cash. Loans have nothing to do with it.
2) I don't think you've payid much attention to Iceland situation. First off, the problem in Iceland was caused by the Iceland banks. Not it's government. Where as Greece couldn't pay the banks. Icelands banks couldn't pay it's depositors. Icelands situation was a lot like the US, and not really analgous to greece, spain, ireland....
Secondly... According to the President of Iceland, what did they do right? What lead to their success?
"As everybody knows now, we did not pump public money into the failed banks. We treated them like private companies that went bankrupt, and we let them fail. Some people say we did it because we didn’t have any other option, there is clearly something in that argument, but it does not change the fact that it turned out to be a wise move or whatever reason. Whereas in many other countries, the prevailing orthodoxy is you pump public money into banks and you make taxpayers responsible for the banks in the long run, and somehow treat the banks as if they are holier institutions in the economy than manufacturing companies, commercial companies, IT companies, or whatever. And I have never really understood the argument: why a private bank or financial fund is somehow holier for the well being and future of the economy than the industrial sector, the IT sector, the creative sector, or the manufacturing sector."
So if you add all of this together and throw in the devaluation of the currency as well, it’s clear that what some people have called the Icelandic model includes a number of measures and approaches that have not been adopted in other countries. On the contrary, it includes some methods in the process that go directly against what has been adopted in other countries. But the outcome is the Icelandic economy is recovering faster and more effectively than any other economy, including the British and the American that suffered from a big financial crisis in 2008.
In otherwords "Too big to fail? Fuck you. Established economic beliefs? Who needs that!"
Iceland is pretty much the anathema to your entire economic viewpoint... and did more or less what I wanted done. Let the big banks fail... and if there are huge complications, solve them as they come.
Now... applying that to Greece... we should let Greece fail and go into receivership? I mean, most of Greece's debt is local. So it's not like it can
outside which, everyone is doing pretty shitty. Except the countries which had a history of "Austerity" in the first place. (running up reasonable debt) Like say, Germany. Which resisted stimulus. Rather then countries like Greece and Italy who tried to spend and spend there ways out of economic hardship, and then when they failed blamed the austerity that was required afterwords.
Reminds me of an old joke "My credit isn't the problem, quite the opposite my problem is that my credit ran out!"
