Big business is currently sitting atop more than $1 trillion in cash, thanks to near zero interest rates provided by the Federal Reserve that has made it easy for corporations to borrow huge sums. But instead of investing this money into new business opportunities and thus producing more jobs, companies are holding onto this huge reserve, waiting for the economy to rebound.

 

A rebound, though, may not happen. A stagnant economy with nearly 15 million unemployed, as well as thousands of small businesses unable to get loans from their banks, makes it unlikely the situation will improve unless big business starts to spend and invest.

 

Corporations now have a combined $1.6 trillion of cash, an amount equal to slightly more than 6% of their total assets, the highest rate since 1964.

 

Optimists point to the fact that big business’ spending on new equipment and software grew 20% in the first half of 2010, but others suspect that this is not a sign of future hiring. “They may actually be using this new investment to be more efficient and cut jobs,” Michael Gapen, an economist at Barclays Capital, told The New York Times.

-Noel Brinkerhoff, David Wallechinsky

 

Cheap Debt for Corporations Fails to Spur Economy (by Graham Bowley, New York Times)

Big Banks Vow to Fight Federal Reserve Loan Disclosures (by Noel Brinkerhoff, AllGov)