Lane notes that many companies were unable to get credit during the last financial crisis, and they're trying to be more prudent about how they spend money now.
"So I think one of the reasons that is contributing to many companies holding onto cash would be the very vivid memories of the severity of the downturn that commenced in mid-2008," he says.
Companies can borrow money very cheaply right now, so instead of paying off their debts, they can sit on cash as long as possible. But there's a more basic reason companies are hoarding money: The U.S. economy simply isn't growing enough.
Source: Moody's
Credit: Alyson Hurt
The labor market is weak, which hampers consumption, notes Charles Biderman, chief executive officer of the research firm TrimTabs. "So without growing income, where's the money to buy more stuff?" he says. "Absent a change in demand, the fact that companies have all this cash, well, good for them. It's not going to help us."
And with the economy limping along, companies are simply reluctant to invest and hire.
"The bottom line is that a large number of very successful U.S. companies are on a wait-and-see mode with the U.S. economy in particular," says Anant Sundaram, who teaches at Dartmouth's Tuck School of Business.
http://www.npr.org/2011/08/17/139703989/companies-sit-on-cash-reluctant-to-invest-hire
