Of course, dear friends, what we are witnessing is the next bubble. Corporations will rack up massive amounts of cash through the dual mechanisms of being able to float bonds and ridiculously low rates and by continuing to cut expenses and not replace workers. They're already sitting on nearly 2 trillion in cash and that is going to just keep going up and up and up ... until the bubble bursts.
How does the bubble burst? Not entirely sure, one never knows about bubbles. It can play out so many dangerous ways. Maybe the economy really does start to pick up, then all those corporations try to spend all that cash at once, causing hyperinflation. That wipes out all the schmucks who bought that corporate debt at ridiculously low interest rates, so the entire bond market crashes and credit dries up. The big companies are sitting on their hoards but the smaller companies who provide most of the jobs don't have access to the bond markets, do they?
Or maybe we fall into massive deflation. Then those ridiculously low rates don't look so ridiculous anymore because the bond holders will in effect be paid back with money that has *more* buying power than what they lent. Now its the borrowers who have the raw deal...
The fact is, the quantitative easing doesn't solve anything, it just causes a bubble to appear somewhere else in the economy, with even more detrimental results when that bubble inevitably bursts.
I don’t agree that corporations are necessarily “not replacing workers.” They may not be replacing U.S. workers. But what I see happening is corporations hiring lots more workers overseas because that’s how they can maximize profits.
So the corporation makes more profit — thus possibly increasing its stock prices — but it adds exactly zero jobs directly to the U.S. economy.
As for the fear, which is not wrong, that corporations will start precipitously spending the piles of cash they are sitting on, I think here too what we’re seeing about the true globalization of these companies will come into play.
Why are coroporations sitting on cash? Mostly become of Obama and the huge amount of uncertainty and animousity his administration has added to a very fragile U.S. economy. IOW, this money is insurance against The Next Stupid Thing President Obama Might Do.
If and when the threat of stupid Obama-isms clears up, and corporations feel more free to let some of the cash out of the bag, they won’t necessarily start spending it in the U.S. In fact, they probably won’t spend much of it here directly! Why would they? Their profitable divisions and operations are overseas.
So once the need to self-insure passes, there will be a whole, literal WORLD in which corporations can start to parcel out this money. Yes, it could still become a money dump that results in hyperinflation. However, given the size of the pool into which the corporations can throw these “pennies,” hyperinflation may be much less likely than when a bunch of U.S. corporations, all with major operations mainly in the U.S., start spending to ramp up only U.S. operations.