Tuesday, October 2, 2012

Little venture, little gain

Isn't it ironic that companies world-wide are hoarding cash because they fear that the recession will be with us much longer; but the very act of hoarding $4 trillion cash instead of spending it in employment, expansion, acquisitions is causing the unintended consequence of prolonging the recession?

If a mere layman like me can see that, why can't the smart captains of industry and commerce?

You wonder.

From - http://www.thetimes.co.uk/tto/business/industries/banking/article3555319.ece#tab-5 -



Storm-tossed economic seas have prompted company directors worldwide to pick up their shovels, head for shore and bury their bulging business cashpiles.
Risk-averse boardrooms are hoarding about $4 trillion while they wait for the clouds to break, according to a study of the world’s top 500 non-financial businesses by the law firm Hogan Lovells.
Misery in Europe, a slowdown in the pace of Chinese growth and only a tepid recovery in the United States have contributed to a culture of corporate inaction. Hogan Lovells found low activity both in dealmaking and in distributing cash to shareholders.
“It’s tempting to see this as encouraging because you feel, sooner or later, that something’s going to need to be done with all this money,” Andrew Pearson, a corporate partner at Hogan Lovells, said.
American companies top the hoarders’ league, having set aside $1.8 billion, citing political uncertainty before next month’s presidential election as their biggest reason for inaction. German businesses have amassed $259 billion, while French companies have put aside $228 billion as the eurozone crisis rages. Britain’s top companies have $147 billion of cash on their balance sheets — almost as much money as the NHS’s annual budget.

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