As companies try to buttress their balance sheet, we are witnessing a healthy, but troublesome after effect: Too much cash on company balance sheets. Excluding utilities and financial institutions, members of the Standard & Poor's 500 Index ended mid last year with a record $648bn in cash and short-term securities.
Companies are hoarding cash, even the non-financial ones, having gotten their handslapped by the credit markets but not (yet) facing redistribution pressure from shareholders in the form of dividends or buybacks.
I'm not in favor of government intervention in the markets, but instead of bank taxes and rhetoric against bonuses, why not give companies an incentive to get this cash off their balance sheets? Tax the cash! Give companies incentives to create jobs with this cash and push them back into the hiring mentality. The money is already sitting with companies, why not use it?
Aveek Guha, President
Companies are hoarding cash, even the non-financial ones, having gotten their handslapped by the credit markets but not (yet) facing redistribution pressure from shareholders in the form of dividends or buybacks.
I'm not in favor of government intervention in the markets, but instead of bank taxes and rhetoric against bonuses, why not give companies an incentive to get this cash off their balance sheets? Tax the cash! Give companies incentives to create jobs with this cash and push them back into the hiring mentality. The money is already sitting with companies, why not use it?
Aveek Guha, President
President, www.mbadaycamp.com
