economic facts that can't be spun part 11 - US Businesses flush with BORROWED Cash !
from
by way of a Professional Investor's BBS ...
(snip)""You may have heard recently that U.S. companies have emerged from the financial crisis in robust health, that they've paid down their debts, rebuilt their balance sheets and are sitting on growing piles of cash they are ready to invest in the economy."
"A look at the facts shows that companies only have a "record amounts of cash" in the way that Subprime Suzy was flush with cash after that big re-fi back in 2005. So long as you don't look at the liabilities, the picture looks great. Hey, why not buy a Jacuzzi?
According to the Federal Reserve, non-financial firms borrowed another $289 billion in the first quarter, taking their total domestic debts to $7.2 trillion, the highest level ever. That's up by $1.1 trillion since the first quarter of 2007; it's twice the level seen in the late 1990s.
The debt repayments made during the financial crisis were brief and minimal: tiny amounts, totaling about $100 billion, in the second and fourth quarters of 2009.
Remember that these are the debts for the non-financials — the part of the economy that's supposed to be in better shape. The banks? Everybody knows half of them are the walking dead.""(snip)
The 'gold foil hat' crowd is of the opinion that non-financial US companies borrowing ( at very low interest rates ) and sitting on large piles of cash ( instead of spending it on capital improvements ) can only be happening for one reason ... that they are preparing for a climate of rising 'receivables' (i.e. an increasing number of private sector and US gov't customers not paying their bills on time), in a future environment of limited additional credit availability and much higher interest rates.
Or stated another way, private sector businesses borrowing record amounts of cash and simply 'sitting on it' ( at low but NOT ZERO interest cost ) amounts to a de-facto insurance premium that if and when large numbers of their customers ( both private sector and public sector ) are unable or unwilling to pay their bills, these businesses will have sufficient supplementary cash available to meet their own obligations and avoid being dragged into bankruptcy along with these non-paying customers.