5 ms·

Almost no one keeps 12 months of cash reserves. Apple, with is famous cash hoard, is around that mark.... I can't think of other large companies offhand that

Almost no one keeps 12 months of cash reserves. Apple, with is famous cash hoard, is around that mark.... I can't think of other large companies offhand that are.

toomuchtodo 7y ago
That was only used as an example as the other extreme. Edit: Very few business have that cash on hand, but will usually have access to credit revolvers that could carry them through this. I am aware of many firms that have drawn down their entire revolver.
- bzbarsky 7y ago
  And I'm aware of a bunch of companies that are explicitly not drawing on their available revolvers because the banks involved are not necessarily in a position to provide that liquidity right now... This is the issue with a systemic problem that affects the entire economy, which is quite different from a single company being affected. And note that even "cash on hand" would be in practice money markets or bank accounts, which would make drawing it down look a lot like a bank run. Now whether we should be bailing companies out, that's a separate question. Fundamentally, if 2020Q1/Q2 GDP is effectively down 30% or whatever the number is, and we want to "replace" that loss, it's hard to see where that sort of money can come from except "all of us" in various forms (higher taxes due to government bailouts, higher prices, higher inflation, etc, etc). The main question is where the incidence of the economic pain will fall. Letting companies go out of business places that incidence partially on the shareholders and partially on the ex-employees and partially on the ex-customers. Unemployment insurance and the like can partially help the employees in the short term. The shareholders seem to get little sympathy, understandably, though note that they include things like pension funds and whatnot. Customers (who can no longer get the goods the company used to provide) may be just out of luck or other companies might at some point spring up to address the demand. In the short term they are just out of luck. It seems to me that a lot of economic readjustment will take place no matter what, with open questions about speed and smoothness.
bigfudge 7y ago
Perhaps this should be a cost of doing business in the future? We all pay for this anyway, so why should taxpayers face all the risk and none of the reward.
- gruez 7y ago
  >so why should taxpayers face all the risk and none of the reward. Simple, bail the companies out (thus saving all the jobs), but wipe out (or significantly dilute) existing shareholders.
  - pinkfoot 7y ago
    The problem then comes (regrettably) when national/regional/local government next tries to get another round of capital-intensive fixed investment form the captains of industry. They find themselves talking to themselves for the money. They hate that.
    - deleted 7y ago
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Almost no one keeps 12 months of cash reserves. Apple, with is famous cash hoard, is around that mark.... I can't think of other large companies offhand that are.

toomuchtodo 7y ago

That was only used as an example as the other extreme. Edit: Very few business have that cash on hand, but will usually have access to credit revolvers that could carry them through this. I am aware of many firms that have drawn down their entire revolver.

bzbarsky 7y ago
And I'm aware of a bunch of companies that are explicitly not drawing on their available revolvers because the banks involved are not necessarily in a position to provide that liquidity right now... This is the issue with a systemic problem that affects the entire economy, which is quite different from a single company being affected. And note that even "cash on hand" would be in practice money markets or bank accounts, which would make drawing it down look a lot like a bank run. Now whether we should be bailing companies out, that's a separate question. Fundamentally, if 2020Q1/Q2 GDP is effectively down 30% or whatever the number is, and we want to "replace" that loss, it's hard to see where that sort of money can come from except "all of us" in various forms (higher taxes due to government bailouts, higher prices, higher inflation, etc, etc). The main question is where the incidence of the economic pain will fall. Letting companies go out of business places that incidence partially on the shareholders and partially on the ex-employees and partially on the ex-customers. Unemployment insurance and the like can partially help the employees in the short term. The shareholders seem to get little sympathy, understandably, though note that they include things like pension funds and whatnot. Customers (who can no longer get the goods the company used to provide) may be just out of luck or other companies might at some point spring up to address the demand. In the short term they are just out of luck. It seems to me that a lot of economic readjustment will take place no matter what, with open questions about speed and smoothness.

bigfudge 7y ago

Perhaps this should be a cost of doing business in the future? We all pay for this anyway, so why should taxpayers face all the risk and none of the reward.

gruez 7y ago
>so why should taxpayers face all the risk and none of the reward. Simple, bail the companies out (thus saving all the jobs), but wipe out (or significantly dilute) existing shareholders.
- pinkfoot 7y ago
  The problem then comes (regrettably) when national/regional/local government next tries to get another round of capital-intensive fixed investment form the captains of industry. They find themselves talking to themselves for the money. They hate that.
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  - deleted 7y ago
    [deleted]