Ezra Klein is full of shit. He paints a nice graph to demonstrate that corporations hoarding cash is nothing new... and because it is nothing new, he decides, there isn't anything wrong with the practice. The only thing is, the man makes absolutely no sense in his posting.
It's Econ 101, Ezra, that money sitting in a vault isn't working and making more money, and money that isn't invested isn't driving employment. Ezra, friend, whose side are you on?
Ezra Klein - Corporations not hoarding cash
Over the past couple of weeks, a lot of people have been talking about how corporations are sitting on $1.8 trillion in cash reserves and that if we could just get them to feel more confident, we could unleash a massive private-sector stimulus. The question, of course, was how to do that.
But Barry Ritholtz presents some compelling evidence that today's reserves aren't anything out of the ordinary. Rather, they're the continuation of a long-term trend toward businesses hoarding money. Check it out:
As you can see, the cash-to-assets ratio more than doubled between 1980 and 2004. The rise between 2004 and 2010 -- which was really a recession-driven drop followed by a rapid recovery -- just puts it back at trend. Which suggests that businesses aren't insecure in a particularly historic way. They're not hiring more and not spending more because they don't see a reason to. But the extraordinary reserves that suggest an extraordinary absence of confidence aren't actually that extraordinary.