Corporations are borrowing at extremely low rates and not spending on anything that will help the economy. You and I have much less luck with borrowing at any rates. "Many households and small businesses are being turned away by bank loan officers, " according to a report in the Times, while "large corporations are borrowing vast sums of money for next to nothing — simply because they can."
The development presents something of a chicken-and-egg situation: Corporations keep saving, waiting for the economy to perk up — but the economy is unlikely to perk up if corporations keep saving.
This situation underscores the limits of Washington policy makers’ power to stimulate the economy. The Federal Reserve has held official interest rates near zero for almost two years, which allows corporations to sell bonds with only slightly higher returns — even below 1 percent. But most companies are not doing what the easy monetary policy was intended to get them to do: invest and create jobs.
The Fed’s low rates have in fact hurt many Americans, especially retirees whose incomes from savings have fallen substantially...
So, who's responsible for unemployment and the bind in which so many older Americans find themselves? You know the answer: large corporations. The monetary policies of the Federal Reserve were intended to lessen the effects on the whole economy of the financial crisis and the economic recession. But for the most part, it has been big business that benefited. The "whole economy" includes you and me. But only a portion of Americans are getting a slice of the pie.
Not you and me. Unless we're investors.
If corporations are getting money easily but not spending it to increase employment, where's the money going? To shareholders, of course!
The cheap money may be having yet another effect unintended by policy makers eager to cut the nation’s 9.6 percent unemployment rate. Several of the corporations borrowing billions on bond markets are using the money to put their own financial house in order rather than to create jobs.
Microsoft said it was using some of its money to buy back shares, other companies are locking in longer-term borrowing, and some of the new borrowing is financing an increase in mergers and acquisitions.
All of this may enrich the corporations’ shareholders and cut company costs in the long run, but it does not necessarily lead to more jobs and it does not represent the big investments in growth that could fuel a sharp economic recovery for everyone.
“They are still holding on to more cash in the same way that Noah built the ark,” said David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto. “It is very telling.”
Just another reason why tea partyers look so stupid to many of us. The tea partyers are the ones who continue to protest bailouts. But they're the ones who have aligned themselves with the political party most closely tied to (owned by) the recipients of those bailouts.
___
Which comes first -- which should come first? People or profits?
