5 ms·

I do think it is both right to view the problem as a savings glut and a genuine lack of worthwhile opportunities for the entities responsible for the savings gl

by hacknat 12y ago

I do think it is both right to view the problem as a savings glut and a genuine lack of worthwhile opportunities for the entities responsible for the savings glut. Why? Because the entities responsible for the savings glut, the multinationals, are the biggest hegemons the world has ever seen. There is a plethora of good opportunities to be exploited out in the world, but not if you're holding $180 billion in savings (I'm looking at you Apple). These huge savings gluts are, effectively, liquidity traps, because these entities (besides, perhaps, governments) can't possibly hope to effectively deploy such large amounts of capital effectively. Add to the mix that inflation is so low, and hanging on to vast sums of cash starts to look like one of the least foolish things the Fortune 500 are doing right now. There isn't a shortage of good opportunities, it's just that good opportunities look so tiny to the big boys. I don't have much hope that targeting a higher inflation rate will do much, but I think it's worth a shot.

opendais 12y ago
Yes, but Apple could probably find 50 $2 billion opportunities. [e.g. Give Marc Andreessen and friends $2 billion to invest in Valley startups to feed the acquihire/acquisition food chain so Apple doesn't have to test risky ideas out itself. Spend $2 billion on stock buy backs. Earmark $2 billion in bonuses over 5 years for top performers at Apple.]
prostoalex 12y ago
It's a QE-induced glut. At some point the Federal Reserve will start selling the assets it bought with freshly printed currency, and with the rates going up more interesting opportunities will appear. Apple's case has been dissected here http://www.quora.com/Apple-company/What-would-be-a-good-use-of-Apples-110-2+-billion-in-cash http://www.quora.com/Apple-company/What-would-be-a-good-use-... - having a large pile of cash is generally better than not having a large pile of cash if you're in the manufacturing business, and need to convince your partners that you have enough financial strength for them to commit to a factory build-out that could take years to accomplish.
eru 12y ago
The tax system seems to be set up backwards: Apple could release the cash to its shareholders, but won't do so for tax reasons (and because its managers are running the show; not the nominal owners of the company, the shareholders).
pjc50 12y ago
"liquidity trap" usually means the opposite: having valuable but hard-to-shift assets and no cash. Defining "worthwhile" as "has positive return that can be captured" is the business definition, but very limiting for society as a whole. We could do with some Fordism returning money to the public.
eli_gottlieb 12y ago
>I do think it is both right to view the problem as a savings glut and a genuine lack of worthwhile opportunities for the entities responsible for the savings glut. Well, that is in fact exactly what a savings glut is: there's so much accumulated capital that it has to compete for investment opportunities, pushing down the rate of return on investments.

by hacknat 12y ago

opendais 12y ago

Yes, but Apple could probably find 50 $2 billion opportunities. [e.g. Give Marc Andreessen and friends $2 billion to invest in Valley startups to feed the acquihire/acquisition food chain so Apple doesn't have to test risky ideas out itself. Spend $2 billion on stock buy backs. Earmark $2 billion in bonuses over 5 years for top performers at Apple.]

prostoalex 12y ago

It's a QE-induced glut. At some point the Federal Reserve will start selling the assets it bought with freshly printed currency, and with the rates going up more interesting opportunities will appear. Apple's case has been dissected here http://www.quora.com/Apple-company/What-would-be-a-good-use-of-Apples-110-2+-billion-in-cash http://www.quora.com/Apple-company/What-would-be-a-good-use-... - having a large pile of cash is generally better than not having a large pile of cash if you're in the manufacturing business, and need to convince your partners that you have enough financial strength for them to commit to a factory build-out that could take years to accomplish.

eru 12y ago

The tax system seems to be set up backwards: Apple could release the cash to its shareholders, but won't do so for tax reasons (and because its managers are running the show; not the nominal owners of the company, the shareholders).

pjc50 12y ago

"liquidity trap" usually means the opposite: having valuable but hard-to-shift assets and no cash. Defining "worthwhile" as "has positive return that can be captured" is the business definition, but very limiting for society as a whole. We could do with some Fordism returning money to the public.

eli_gottlieb 12y ago

>I do think it is both right to view the problem as a savings glut and a genuine lack of worthwhile opportunities for the entities responsible for the savings glut. Well, that is in fact exactly what a savings glut is: there's so much accumulated capital that it has to compete for investment opportunities, pushing down the rate of return on investments.