A recent USA Today article by Matt Krantz discussed the massive amounts of cash now being held on the balance sheets of large US corporations.
Krantz says that according to S&P, non-financial companies in the Standard & Poor's 500 are now carrying a record $837 billion in cash - up 26% from just a year ago. "That's enough to pay 2.4 million people $70,000-a-year salaries for five years."
However, as Bernanke & Company are keenly aware, companies are neither hiring new workers nor investing aggressively in new plants and equipment. Rather, most companies are content to sit on their fortunes while earning just a fraction of a percent on their money.
First and perhaps most importantly, corporate managers are not seeing the sustainable end demand necessary to justify hiring and other investment. But perhaps just as important is the policy uncertainty with regard to future tax rates and healthcare costs. And finally, many companies (especially smaller and mid-sized companies) have seen their access to credit sharply reduced as banks struggle with capital deficiencies, new regulatory requirements and soaring loan losses. Rather than be held hostage to the whims of the banks (and bank regulators), many companies are simply holding on to what they have.