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Friday, October 29, 2010

Why the argument for Fed Stimulus is a Lie

~  "Its Mine.. all Mine"

The biggest argument for more Fed stimulus is to get money into banks so they will start lending to others and to businesses so they will start hiring.   Sounds just wonderful...

Its also complete utter bull...

US Companies Stash One Trillion Dollars in Cash: Moody's- "US companies are hoarding nearly one trillion dollars of cash that they are unlikely to use for expansion amid a muddled outlook on economic recovery, rating agency Moody's said. "Companies will hesitate to spend their cash hoards on expansion until there is greater certainty about the direction of the US economy," said Steven Oman, senior vice president at Moody's Investor Service.

A new Moody's study of corporate cash balances found that US companies, excluding financial firms, had about 943 billion dollars of cash and short-term investments on their balance sheets at mid-year 2010. The 20 most cash-rich companies had a combined 346 billion dollars.  "Given low demand and capacity utilization within certain industries, companies are wary of investing their cash in new capacity and adding workers, thereby doing little to abbreviate the jobless recovery," it said.  Moody's forecast that as the economy stabilizes, companies most likely would use their cash for share repurchases and acquisitions."- Agence France-Presse

 ~ "Mmmm, this smells soooo Good!!"

Did you catch that last sentence?  So even if the economy fully strengthened, "companies most likely would use their cash for share repurchases and acquisitions", and Not to hire new workers.

~  You can spend $10 Trillon.. or $10 Zillion dollars..  but until companies are FORCED to hire again, such as government setting up hiring quotas and the threat of Heavy taxes on businesses that do not meet them, you are not going to solve this unemployment problem, no matter how much the government gives to these businesses.  Then again, the goal of Fed stimulus never was job creation, so expect a lot more of it.

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