4 ms·

Sounds like a prudent idea. On the other hand I’d worry about the macro economic effects if every company held large amounts of unproductive capital.

beervirus 6y ago
It’s not sitting under a mattress. It’s surely invested in something productive.
- anbotero 6y ago
  I think in this particular case, it’s cash, or at least the promise from a bank or fund or whatever the hell it is, that they can count on that money in cash whenever they one.
  - Consultant32452 6y ago
    When they say "cash" they almost certainly mean CCE (Cash and Cash Equivalents), which is being put to productive use by third parties in exchange for nominal interest income. https://www.investopedia.com/terms/c/cashandcashequivalents.asp https://www.investopedia.com/terms/c/cashandcashequivalents....
  - zepto 6y ago
    No - it’s the worlds largest hedge fund: https://en.m.wikipedia.org/wiki/Braeburn_Capital https://en.m.wikipedia.org/wiki/Braeburn_Capital
baddox 6y ago
I think that depends on what you mean by "large amounts." If we're talking about cash savings to whether economic downturns, pandemics, etc., presumably we should be looking at what is large relative to the operating costs of the company. In the same way that it's common advice for individuals to have some number of months of living expenses saved for emergencies, I think that also makes sense for companies, and I don't see that portion of savings being a threat to the economy.
lend000 6y ago
If money is in a bank it is being redistributed throughout the economy at 1 / the fractional reserve ratio. So $200 billion in their bank account could end up creating $2 trillion in additional money supply in the economy, originating from loans.
- amiga_500 6y ago
  https://www.bankofengland.co.uk/working-paper/2018/banks-are-not-intermediaries-of-loanable-funds-facts-theory-and-evidence https://www.bankofengland.co.uk/working-paper/2018/banks-are... Banks are constrained by demand, they can create credit at will.
  - qaq 6y ago
    National banks can not commercial banks
    - maxerickson 6y ago
      The link there is about commercial banks.
      - qaq 6y ago
        The link above is about economic models for analyzing economic effects. For any actual commercial bank there are very real limits to how much credit they can extend. The models discussed simplify analysis and do not really represent anything particularly meaningful about operation of any particular real world bank.
        amiga_500 6y ago
        "To avoid misunderstandings, while FMC models reflect the fact that banks face no technical limits to expanding their balance sheets instantaneously and by large amounts, they also reflect the fact that banks face economic limits. However, the latter do not include physical limits such as the availability of sufficient savings. Rather, the most important limits are their own and their customers’ potentially volatile expectations regarding future profitability and solvency"

beervirus 6y ago

It’s not sitting under a mattress. It’s surely invested in something productive.

anbotero 6y ago
I think in this particular case, it’s cash, or at least the promise from a bank or fund or whatever the hell it is, that they can count on that money in cash whenever they one.
- Consultant32452 6y ago
  When they say "cash" they almost certainly mean CCE (Cash and Cash Equivalents), which is being put to productive use by third parties in exchange for nominal interest income. https://www.investopedia.com/terms/c/cashandcashequivalents.asp https://www.investopedia.com/terms/c/cashandcashequivalents....
- zepto 6y ago
  No - it’s the worlds largest hedge fund: https://en.m.wikipedia.org/wiki/Braeburn_Capital https://en.m.wikipedia.org/wiki/Braeburn_Capital

baddox 6y ago

I think that depends on what you mean by "large amounts." If we're talking about cash savings to whether economic downturns, pandemics, etc., presumably we should be looking at what is large relative to the operating costs of the company. In the same way that it's common advice for individuals to have some number of months of living expenses saved for emergencies, I think that also makes sense for companies, and I don't see that portion of savings being a threat to the economy.

lend000 6y ago

If money is in a bank it is being redistributed throughout the economy at 1 / the fractional reserve ratio. So $200 billion in their bank account could end up creating $2 trillion in additional money supply in the economy, originating from loans.

amiga_500 6y ago
https://www.bankofengland.co.uk/working-paper/2018/banks-are-not-intermediaries-of-loanable-funds-facts-theory-and-evidence https://www.bankofengland.co.uk/working-paper/2018/banks-are... Banks are constrained by demand, they can create credit at will.
- qaq 6y ago
  National banks can not commercial banks
  - maxerickson 6y ago
    The link there is about commercial banks.
    - qaq 6y ago
      The link above is about economic models for analyzing economic effects. For any actual commercial bank there are very real limits to how much credit they can extend. The models discussed simplify analysis and do not really represent anything particularly meaningful about operation of any particular real world bank.
      - amiga_500 6y ago
        "To avoid misunderstandings, while FMC models reflect the fact that banks face no technical limits to expanding their balance sheets instantaneously and by large amounts, they also reflect the fact that banks face economic limits. However, the latter do not include physical limits such as the availability of sufficient savings. Rather, the most important limits are their own and their customers’ potentially volatile expectations regarding future profitability and solvency"