Moody’s reported that companies are hoarding cash. This hoarding is due to uncertainties in the economy. Cash to capital expenditures is at an all time high ratio. Trillions of dollars are not being spent because of fear. I suggested this in an earlier post speculatively so I was pleased to see that spending reluctance was quantified.
In light of this, next week America will occupy itself with the election and imagine that the vote means something. The next day on Nov 3, the Federal Reserve will print untold billions and perhaps even trillions of dollars. The stated goal of this legal counterfeiting is to lower already historically low interest rates to stimulate spending. But companies are refusing to spend their own saved trillions. What on earth could inspire them to borrow? The only thing right now that seems like a good investment are the bonds that are in turn bought by the Fed through quantitative easing!
It doesn’t seem possible that grown ups could possibly believe the Fed’s policy justification.
Fortunately, I will miss all the madness as I’m heading up to northern Alberta this week. It’s a cold world up there, but at least it’s a domain of reason.