Companies Borrow at Low Rates, but Don’t Spend

Topics: Investment, Cost, Costs Pages: 2 (572 words) Published: March 10, 2013
Companies borrow at low rates, but don’t spend
At present, a lot of households and small business in economy are rejected to be loaned because some large corporations borrow a large amount of dollars for next to nothing. This phenomena happens a lot. Such as Microsoft, it issues bonds at low interest rate, whereas few of them invest the money to new equipment, technology, labours or jobs. Instead, they are waiting for the economy improving with depositing the cash. This sort of situation likes a chicken and egg: the companies want the entire economy to perk up. However, expected thing is always opposite. In fact, Federal’s policy of America which Federal Reserve has held a pretty low official interest rate close to zero which makes firms can sell bonds with slightly higher returns, has hurt many Americans, especially those retirees whose personal income has fallen. So some economists estimate that the phenomenon are benefiting those corporations by borrowing and keeping the cash, but it is not benefit for the whole economy yet. According to the a variety of data by researched, we find that American firms have been saving more dollars since the financial storm and the proportion of these assets that these corporations keep have gotten the 6.2 percent of total assets in first quarter. It has brought a great influence on the economy. From a different point of view, these corporations just want to keep the cash in order to protect it involving into recessionary maelstrom again. However, some operations of the corporations are criticized by the economists. They spend a few money on investing some factories or some new equipments. The economists thought that may actually be using the new investment to be more efficient and cut jobs. Even several of firms borrowing billions of dollars on bond market are using the money to put their financial house in order rather than to create jobs. All of these operations may enrich the corporations’ shareholders and cut...
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