Uncertain Outlook Makes Companies Hoard Cash. Can You Blame Them?

Business Spending Falls As Companies Hoard Cash (Can you blame them?)

Figures published by the Office for National Statistics (ONS) on Friday showed that business spending in the final quarter of 2011 fell 5.6% to £28.7 billion.

Rather than invest in new projects, staff, or plant and equipment, companies are instead hoarding cash. Recent data from Deloitte shows that British non-financial firms have amassed record cash reserves of £731 billion. And it’s a similar story across the pond with US corporations holding on to $1.73 trillion (£1.09 trillion) in cash.

Can you blame them?

It’s hard to criticize companies for being so defensive given what’s coming their way. In fact it’s to be encouraged, it’s just a shame that individuals aren’t being encouraged or rewarded for rebuilding their savings. Instead, they are being penalised for doing so with absurdly low interest rates and high inflation. It’s sad, because only when we have rebuilt our savings (and allowed the system to correct) can we begin a new cycle of true, lasting prosperity.

True wealth and prosperity is created by underconsumption, the building of savings, and then the investment of those savings in productive capacity, such as the construction of a factory that actually makes things people need and want. Wealth is not created by borrowing money and buying things. Sorry George.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>