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  1. Standard member uzless
    The So Fist
    15 Oct '10 17:40 / 2 edits
    The right wing cupcakes seem to have taken over RHP in my absence. They continue to spew forth nonsensical garbage. That 10.1% thread being another classic example.

    So, to debunk the idiocy and idiots, once again, i present reality to you. This is why unemployment is high and went higher than predicted. The private sector won't hire. Read AND LEARN. Then, for god's sake, take an economics class before you go attempt to discuss anything related to economics. Jebus.

    And stop blaming obama for all things related to the economy ffs...what a joke.
  2. Standard member uzless
    The So Fist
    15 Oct '10 17:41 / 1 edit
    Firms borrow vast sums, sit on cash
    ------------------------------------------

    Graham Bowley
    The New York Times News Service
    Published Monday, Oct. 04, 2010 12:33PM EDT
    Last updated Thursday, Oct. 07, 2010 6:50PM EDT


    As many households and small businesses in the United States are being turned away by bank loan officers, large corporations are borrowing vast sums of money for next to nothing - simply because they can.

    Companies like Microsoft Corp are raising billions of dollars by issuing bonds at ultra-low interest rates, but few of them are actually spending the money on new factories, equipment or jobs. Instead, they are stockpiling the cash until the economy improves.

    The development presents something of a chicken-and-egg situation - corporations keep saving, waiting for the economy to perk up, but the economy is unlikely to perk up if corporations keep saving.

    This situation underscores the limits of Washington policy makers’ power to stimulate the economy. The Federal Reserve has held official interest rates near zero for almost two years, which allows corporations to sell bonds with only slightly higher returns - even below 1 per cent. But most companies are not doing what the easy monetary policy was intended to get them to do: invest and create jobs.

    The Fed’s low rates have in fact hurt many Americans, especially retirees whose incomes from savings have fallen substantially. Big companies like Johnson & Johnson, PepsiCo Inc. and IBM seem to have been among the major beneficiaries.

    “They are benefiting themselves by borrowing and keeping this cash, but it is not benefiting the economy yet,” said Dana Saporta, an economist at Credit Suisse in New York.

    American corporations have been saving more money since the financial collapse of 2008. But a recent rush of blue-chip bond offerings - including a $4.75-billion (U.S.) deal last month by Microsoft, one of the richest companies in the world - has put even more money in their coffers.

    Corporations now sit atop a combined $1.6-trillion of cash, a figure equal to slightly more than 6 per cent of their total assets. In the first quarter of this year, that figure was 6.2 per cent of assets, the highest level since 1964, when it was 6.4 per cent.

    When will corporations start spending that money - in particular, by hiring?

    That speaks to what has become the great question of this long, jobless recovery: When will corporate America start to feel confident enough to put its cash to work, building factories and hiring some of the nation’s 14.9 million unemployed?

    Businesses are holding on to their protective cash cushions, worried perhaps that the economy could slip back into recession or at least grow too lethargically to make an investment worthwhile.

    The nation’s corporations will be strong, well-capitalized and ready to act aggressively when executives finally decide it is time to expand their businesses.

    After running up sharply every quarter since mid 2008, the ratio of cash holdings to assets by corporations fell slightly for the first time in the second quarter of this year.

    Although investment in factories and plants still languishes, companies have spent some money on investment in new equipment and software. That spending grew at an annualized rate of more than 20 per cent in the first two quarters of this year.

    But economists say that such investment is still below its peak before the financial crisis.

    In addition, many of the new machines and computers may be replacing older machines companies put off retiring in the recession. Businesses are playing catch-up, and little expansion is occurring.

    “They may actually be using this new investment to be more efficient and cut jobs,” said Michael Gapen, an economist at Barclays Capital. “The mix of signals right now is still telling corporations to sit tight and wait.”

    Mr. Gapen said those signals included the direction of the housing market, the outcome of midterm election, the effects on the economy as the fiscal stimulus wears off and any changes in tax policy.

    They are deciding, “Why don’t we just wait until the first quarter of next year?” he said.

    The cheap money may be having yet another effect unintended by policy makers eager to cut the nation’s 9.6 per cent unemployment rate. Several of the corporations borrowing billions on bond markets are using the money to put their own financial house in order rather than to create jobs.

    Microsoft said it was using some of its money to buy back shares. Other companies are locking in longer-term borrowing, and some of the new borrowing is financing an increase in mergers and acquisitions.

    All of this may enrich the corporations’ shareholders and cut company costs in the long run, but it does not necessarily lead to more jobs and it does not represent the big investments in growth that could fuel a sharp economic recovery for everyone.

    “They are still holding on to more cash in the same way that Noah built the ark,” said David Rosenberg, chief economist at Gluskin Sheff + Associates in Toronto. “It is very telling.”

    In the case of Microsoft’s bond offering, one factor might have been avoiding a big tax bill, said Richard J. Lane, who analyzes Microsoft for Moody’s. If Microsoft had needed cash, it could have pulled some from its operations abroad, but “borrowing new money on the debt markets is now cheaper than bringing its own money back from overseas,” Mr. Lane said.

    Microsoft’s offering was only its second; its first was last year. The second offering included three-year debt at an interest rate of 0.875, among the lowest on record for that type of borrowing.

    According to the financial data provider Dealogic, U.S. companies have borrowed $488-billion on the American high-yield and investment grade bond markets so far this year, 7 per cent more than businesses borrowed during all of 2009, and on track to at least match the $589-billion borrowed in the boom year in 2007, which was the highest on record.

    Smaller companies continue to have trouble borrowing, and most of the new financing is limited to bigger corporations.

    Their borrowing spree is in contrast to America’s households, which continue to cut their debt and consumption. Perhaps unsure of the recovery, like the corporations hoarding cash, Americans are saving far more than they have in years, and some economists fear that consumers’ frugality will further hobble growth.

    One of the biggest corporations to borrow recently, DuPont Co. said it was using the cheaper money to lock in borrowing over a longer period.

    “The current low interest rate environment provides DuPont a great opportunity to refinance our long-term debt at lower rates,” it said in a statement.

    Conditions have become so good that some companies are borrowing money they will not have to repay until the next century. In August, the railroad Norfolk Southern Corp. borrowed $250-million in 100-year bonds at an annual rate of 5.95 per cent.

    Robin Chapman, a spokesman for that company, said, “Opportunistic borrowing is a good way to characterize this.” He said that Norfolk Southern was seeing a “slow and steady pickup” in rail traffic but that any hiring the company was doing was to replace workers lost through attrition.

    Other companies are borrowing to finance acquisitions. PepsiCo borrowed recently to help pay for the takeover of two bottling plants. Hertz borrowed $300-million for its bid to buy a rival car rental company, Dollar Thrifty.

    Economists say it is rational for companies to seize the opportunity to borrow at low interest rates and to buy back shares. But Guy LeBas, a fixed-income strategist at Janney Montgomery Scott in Chicago, said, “It is not particularly beneficial for economic conditions.”

    http://www.theglobeandmail.com/report-on-business/economy/growth/firms-borrow-vast-sums-sit-on-cash/article1741410/
  3. 15 Oct '10 19:13 / 1 edit
    The private sector is not hiring precisely because of the rules and policies that Obama has put in place. One would have to be some kind of an idiot to start hiring now, when we're uncertain as to what the tax rates will be starting in January (for one thing).

    This is far and away the most deliberately anti-business administration the country has ever had.
  4. Subscriber no1marauder
    It's Nice to Be Nice
    15 Oct '10 19:16
    Originally posted by TheBloop
    The private sector is not hiring precisely because of the rules and policies that Obama has put in place. One would have to be some kind of an idiot to start hiring now, when we're uncertain as to what the tax rates will be starting in January (for one thing).
    That's preposterous; businesses can never be sure what tax rates are going to be. And businesses hired when tax rates were far higher than they are now.
  5. Subscriber no1marauder
    It's Nice to Be Nice
    15 Oct '10 19:19
    Originally posted by TheBloop
    The private sector is not hiring precisely because of the rules and policies that Obama has put in place. One would have to be some kind of an idiot to start hiring now, when we're uncertain as to what the tax rates will be starting in January (for one thing).

    This is far and away the most deliberately anti-business administration the country has ever had.
    "Anti-business"?? What a laugh. Obama negotiated with business as to the content of health care reform. And he's proposed and signed numerous tax cuts for businesses: http://www.whitehouse.gov/the-press-office/2010/09/10/fact-sheet-president-obama-has-signed-eight-small-business-tax-cuts-law-
  6. 15 Oct '10 19:30 / 1 edit
    Originally posted by uzless
    Firms borrow vast sums, sit on cash
    ------------------------------------------

    Graham Bowley
    The New York Times News Service
    Published Monday, Oct. 04, 2010 12:33PM EDT
    Last updated Thursday, Oct. 07, 2010 6:50PM EDT


    As many households and small businesses in the United States are being turned away by bank loan officers, large corporations are b ...[text shortened]... andmail.com/report-on-business/economy/growth/firms-borrow-vast-sums-sit-on-cash/article1741410/
    we have something akin to two cars at an intersection each insisting the other one go first -- and meanwhile, the traffic jam behind them builds more and more.

    one car is Businesses and the other car is Consumers -- and the Government is the traffic cop offering treats and making threats in a mostly futile attempt (so far) to get one of these cars to finally get moving.
  7. 15 Oct '10 19:41 / 1 edit
    Originally posted by TheBloop
    The private sector is not hiring precisely because of the rules and policies that Obama has put in place. One would have to be some kind of an idiot to start hiring now, when we're uncertain as to what the tax rates will be starting in January (for one thing).

    This is far and away the most deliberately anti-business administration the country has ever had.
    uzless wants a discussion that moves beyond attempts to just blame everything in the economy on Obama, so can we set aside Obama's role in all of this for the time being?

    in your opinion - what OTHER factors, besides Obama's policies, do you believe is contributing to the economic problems we're facing?
  8. 15 Oct '10 20:04
    Originally posted by no1marauder
    That's preposterous; businesses can never be sure what tax rates are going to be. And businesses hired when tax rates were far higher than they are now.
    Are you so sure your ancestors in the 50s were actually able to eat when the marginal tax rate was 90%? How about during Reagan's term when it was 70%? I think people must have walked on all-fours then and had to submit to beatings just to be allowed to lick the scraps off a rich man's table.
  9. 15 Oct '10 20:04
    Originally posted by TheBloop
    The private sector is not hiring precisely because of the rules and policies that Obama has put in place. One would have to be some kind of an idiot to start hiring now, when we're uncertain as to what the tax rates will be starting in January (for one thing).

    This is far and away the most deliberately anti-business administration the country has ever had.
    Gee, even more "anti-business" administration than the Eisenhower administration, when the economy boomed?
  10. Standard member caissad4
    Child of the Novelty
    17 Oct '10 01:28
    Originally posted by TheBloop
    The private sector is not hiring precisely because of the rules and policies that Obama has put in place. One would have to be some kind of an idiot to start hiring now, when we're uncertain as to what the tax rates will be starting in January (for one thing).

    This is far and away the most deliberately anti-business administration the country has ever had.
    Actually taxes are LOWER than during the Clinton administration. And the taxes will return to that level in January. And the record surplus from the Clinton admin was squandered by President Cheney, oops I mean Bush.
  11. Donation Luck
    TEA PARTY MEMBER
    19 Oct '10 04:35
    Originally posted by caissad4
    Actually taxes are LOWER than during the Clinton administration. And the taxes will return to that level in January. And the record surplus from the Clinton admin was squandered by President Cheney, oops I mean Bush.
    The surplus was caused by the tax cuts by Bush senior.
    The max marginal federal tax rate was 31% until 1992, but increased to 39.6% from 1993, thanks cheating Bill!
    Reagan cut the max marginal federal tax rate first from 50% to 38.5% and then to 28% in 1988 that Bush senior increased to 31%. Reagan's tax cuts started a positive effect on governmental revenue, but took a turn down by Bush tax increase and eventually a sharp turn down by Clinton's tax increases.

    Sincerely,

    Harri, CPA
  12. 19 Oct '10 05:32
    Originally posted by uzless
    The right wing cupcakes seem to have taken over RHP in my absence. They continue to spew forth nonsensical garbage. That 10.1% thread being another classic example.

    So, to debunk the idiocy and idiots, once again, i present reality to you. This is why unemployment is high and went higher than predicted. The private sector won't hire. Read AND LEARN. ...[text shortened]... cs. Jebus.

    And stop blaming obama for all things related to the economy ffs...what a joke.
    why should they hire?
  13. 19 Oct '10 05:33
    Originally posted by uzless
    The right wing cupcakes seem to have taken over RHP in my absence. They continue to spew forth nonsensical garbage. That 10.1% thread being another classic example.

    So, to debunk the idiocy and idiots, once again, i present reality to you. This is why unemployment is high and went higher than predicted. The private sector won't hire. Read AND LEARN. ...[text shortened]... cs. Jebus.

    And stop blaming obama for all things related to the economy ffs...what a joke.
    do you think you're living in a communist paradise, where they HAVE to hire?
  14. 19 Oct '10 10:15
    Originally posted by Luck
    The surplus was caused by the tax cuts by Bush senior.
    The max marginal federal tax rate was 31% until 1992, but increased to 39.6% from 1993, thanks cheating Bill!
    Reagan cut the max marginal federal tax rate first from 50% to 38.5% and then to 28% in 1988 that Bush senior increased to 31%. Reagan's tax cuts started a positive effect on governmental revenue ...[text shortened]... rease and eventually a sharp turn down by Clinton's tax increases.

    Sincerely,

    Harri, CPA
    http://en.wikipedia.org/wiki/United_states_public_debt

    The graph on the right shows the development of US public finances. Notice the end of the declining trend from 1945 onwards as soon as Reagan took office.
  15. 19 Oct '10 12:36 / 3 edits
    Originally posted by Luck
    The surplus was caused by the tax cuts by Bush senior.
    The max marginal federal tax rate was 31% until 1992, but increased to 39.6% from 1993, thanks cheating Bill!
    Reagan cut the max marginal federal tax rate first from 50% to 38.5% and then to 28% in 1988 that Bush senior increased to 31%. Reagan's tax cuts started a positive effect on governmental revenue ...[text shortened]... rease and eventually a sharp turn down by Clinton's tax increases.

    Sincerely,

    Harri, CPA
    http://en.wikipedia.org/wiki/Confirmation_bias

    actually -- this pretty much applies to every single one of us here -- everyone can take the same set of facts and make them fit whatever story we want them to tell.