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Friday, May 20, 2016

Distribution is an issue

Free market capitalists might not like it, but the distribution of wealth is a legitimate societal problem and it is only going to get worse:
The rising cash holdings of U.S. corporations is increasingly in the hands of a few U.S. companies, with just five tech firms having grabbed a third of it. And nearly three-quarters of cash held by non-financial U.S. companies is stashed overseas outside the long arm of Uncle Sam.

Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco System (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service.  That's even more cash concentration in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors.

Corporate America's rising pile of cash is becoming increasingly important to investors as profit growth and the stock market stalls. The amount of cash held by U.S. companies rose 1.8% in 2015. Unfortunately for U.S. investors, 72% of total cash held by all non-financial U.S. companies is stockpiled outside the U.S., up from 64% in 2014 and 58% in 2013 as companies try to avoid paying U.S. tax rates.
Remember, corporatism is not capitalism. And free trade doesn't benefit a country if the money collected for its exports never enter it.

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93 Comments:

Anonymous Mike May 20, 2016 2:47 PM  

Remember, corporatism is not capitalism. And free trade doesn't benefit a country if the money collected for its exports never enter it.

Amen. That message needs to be heard by every elected official in this country.

Blogger Servant of the Chief May 20, 2016 2:48 PM  

Honestly, this was exacerbated in the early 2000s when old laws were undone in the US that basically allowed huge corporations to merge (there is a reason there are only 5 companies that dominate American TV now in comparison to the 30 or so in the 90s and it isnt just the usual Thunderdome style corporate competition we've been told it was). And the problem affects more than just the corporate world.

In the UK while I was Studying law, law firms that have been independent for over a century suddenly all started merging together with Hybrid names just before the world Financial crises happened. I dont think this is a coincidence, I wouldnt be surprised if similar things happened in other sectors of society but I'd need guys from other fields to chip in on their experiences.

Monopolies are good for no one in the long run.

Anonymous BGKB May 20, 2016 2:52 PM  

And free trade doesn't benefit a country if the money collected for its exports never enter it.

We can't even call that any trade, but letting them hold money earned/taxed overseas is a different issue.

OT another hate hoax, this is why I sit with a view to entrances.
http://nypost.com/2016/05/17/man-who-bashed-gay-couple-with-chair-at-dallas-bbq-is-also-gay-lawyer-says/

Anonymous fop May 20, 2016 2:56 PM  

Corporations are people.

Mitt said so.

Blogger Josh May 20, 2016 2:59 PM  

Our tax system is the most retarded one on the planet

Blogger Josh May 20, 2016 2:59 PM  

Corporations are people.

Mitt said so.


My friends!

Blogger Al From Bay Shore May 20, 2016 3:02 PM  

Wealth distribution becomes an issue with excessive government intervention into the economy via regulatory prohibitions.

Blogger tz May 20, 2016 3:11 PM  

stashed overseas outside the long arm of Uncle Sam.
They assume this is true, like most assume they own their bank accounts and retirement accounts.
The IRS and tax laws have before been used to reach out and crush someone, or just grab the cash.
There can be nice reverse-lobbying - nice crony corp you got there, it would be tragic if anything happened to it.
The FBI and more can compel Apple to do far more than unlock a few phones.
Since they are and will be going full Hillary, it will be quite interesting when Trump gets elected.

Anonymous A.B. Prosper May 20, 2016 3:14 PM  

No Al, government intervention isn't the cause. Regulatory controls and prohibition are how distribution is maintained and a race to the bottom is prevented

Corporations today aren't focused on more than a quarter ahead if that but if they were or I was running one that was, I'd be thinking of some means to get that money distributed. Its an irresistible temptation to take it for some of the leftist we are probably going to be getting in numbers assuming the system doesn't implode and the new State decides those dollars have no value any more.

Anonymous Joe Blowe May 20, 2016 3:19 PM  

Corporations are creatures of the State and at one time made to serve the public good, meaning provide goods and services and jobs to the people that gave them the protections of incorporation in the first place. The American Middle-class exploded under this arrangement. This article explains it all very well.

http://reclaimdemocracy.org/corporate-accountability-history-corporations-us/

Anonymous Freestater May 20, 2016 3:20 PM  

I don't understand why the investors in these companies are not demanding a large one time dividend if the company is not using that cash in a manner to grow the company. I would be lobbying for a large dividend if I was a majority stakeholder in Apple or Google.

Anonymous Surly May 20, 2016 3:21 PM  

One problem with the pro-free market crowd is that they fail to realize that corporations are creations of the state, and therefore represent another governmental intervention in the market. Like all such interventions, they bring unintended negative consequences. A true free market would not, through legal fictions, artificially separate the owners and decision-making officers from responsibility for corporate debts and liabilities.

Anonymous Goodnight May 20, 2016 3:21 PM  

And free trade doesn't benefit a country if the money collected for its exports never enter it.

Yes, yes. A couple of years ago I was talking to a friend about the economy. He was worried about hyperinflation - which would start just any day now - because of QE. I kept trying to explain the concept of velocity of money, and that between financials sitting on parked cash and multinationals moving more and more profits offshore that for all practical purposes our money supply was shrinking. He just couldn't get the concept.

Blogger Student in Blue May 20, 2016 3:30 PM  

Isn't it just as fair to say that distribution of wealth is not cause of problems, but an effect of other deeper ills?

Blogger Student in Blue May 20, 2016 3:32 PM  

Rather, "isn't it correct to say"? Changes the topic slightly.

Anonymous Michael Maier May 20, 2016 3:33 PM  

What percentage of the total money supply is being discussed here?

1/3 of the cash held by 5 companies is how many drops out of the bucket?

Blogger Dave May 20, 2016 3:35 PM  

These corporations need cash reserves otherwise how would Apple have just shelled out $1 bil­lion in cash to buy Chinese Uber competi­tor Didi Chuxing.

Anonymous Andrew E. May 20, 2016 3:38 PM  

People should only invest in public companies if they themselves know how to read balance sheets, income and cash flow statements and all the footnotes therein. And have the time to study and follow the financials and the developments of the companies. If you can't or won't do these things then you have no business investing in stock markets.

Mutual funds and index funds are a terrible innovation.

Blogger dc.sunsets May 20, 2016 3:44 PM  

Remember, corporatism is not capitalism.

True, but neither is a pile of IOU's cash forever. Granted, since 1932 there has not been a significant period when credit>>>>debt=cash, but now that we have a veritable galaxy of IOU's, the stage is set for banks, corporations, and everyone else to discover that while a banknote's existence is permanent and its value only related to how many other banknotes (and their equivalent) exist, debt-as-money can lose value simply if people begin to question its backing (AKA the trustworthiness of the issuer or any collateral value.)

People could wake up some morning and discover the equivalent of their wallet's contents partially evaporating. (This would look like the value of their debt securities plummeting on the open market.)

Blogger dc.sunsets May 20, 2016 3:48 PM  

PS: This is one possible rationale for why interest rates paid on deposits right now are near zero. Why pay to rent what is basically free (and everything's value is based on what someone will pay for it...so free money is basically valueless at the margin...i.e., the Fed's main product is worthless.)

What if ZIRP is just a signal that these piles of "cash" are just an illusion, and that while today $1M will buy a very nice yacht, assuming that same $1M in DEBT (some clown's IOU's) will always buy that nice yacht seems far from assured.

Blogger dc.sunsets May 20, 2016 3:52 PM  

This comment has been removed by the author.

Blogger kurt9 May 20, 2016 3:53 PM  

Unfortunately for U.S. investors, 72% of total cash held by all non-financial U.S. companies is stockpiled outside the U.S., up from 64% in 2014 and 58% in 2013 as companies try to avoid paying U.S. tax rates.

It is rational for these companies to keep the money earned from international sales outside the U.S. If I was running one I would be doing the same. For one, our tax rates, particularly corporate rates, are higher than most Asian countries. Secondly, this money could be invested in operations outside the U.S. The combined market for tech goods in Asia, particularly on the OEM side, is larger than that in the U.S. It then makes sense to use a lot of the money earned from those markets to invest back into those markets.

I would do the same if I had a venture capital firm or hedge fund as well. I would be looking to invest in start-ups or investment opportunities as much in places like Singapore (where there is a LOT of tech stuff going on) as there is in the U.S. There is actually a lot of technological innovation going on in Europe as well. Why would I limit myself geographically?

Remember, these are companies selling into a world-wide market. The market for tech good as well as specialized technology/manufacturing equipment is not limited to one country's market. Boeing manufactured over 700 of the 747-400 jumbos between 1989 to 2005, with the majority of these sold to Asian carriers.

Heck, when I was sales manager for a scientific instrument manufacturer, I sold into markets in North America, Europe, and various East Asian countries through a network of independent sales reps. We had 7 employees (and manufactured here in the U.S.). So, the global marketing game is not limited to the corporate giants.

I see a lot of winging about "free trade" on this and some other blogs. I think you guys lack the business experiences to understand the realities of the global marketplace (surprise, surprise, as I think few of you have any actual experience in international business at all). A company that manufacturers semiconductor chips or jumbo jets is necessarily going to sell into world-wide markets. You're not going to have a semiconductor fab or aircraft manufacturing operation in every single country of the world (which is what your calls for autarky would imply). Like I said, even a company that employs 7 people to manufacture SPM's (scanning probe microscopes) is going to sell world-wide into a variety of industrial applications. We're not going to limit ourselves geographically. Such would be stupid.

Blogger dc.sunsets May 20, 2016 3:54 PM  

PPS: Not only are Americans squandering the wealth of the country by exporting manufacturing and then paying dollars to foreigners to buy stuff, importing Mexicans to do the dirty work has the same effect:

Remittances to Mexico (mostly of USD) are reportedly twice Mexico's largest industry:
http://www.newsmax.com/Newsfront/remittances-mexico-workers-dollars/2016/05/16/id/729091/

We're shipping value out the door, and foreigners are using it to buy up the land our ancestors conquered.

We are TRULY fools.

This is the unseen effect of the Greatest Credit Bubble in history. It disguises the gangrene with the perfume of the Greatest Asset Mania in history.

Anonymous johnc May 20, 2016 3:55 PM  

"Too much capitalism does not mean too many capitalists, but too few." -- GK Chesterton

Blogger kurt9 May 20, 2016 4:00 PM  

One more point. Another factor motivating U.S. companies to keep their money outside the U.S. is Obamanomics and the general kleptocracy of the liberal-left. This is called capital flight, guys.

If Trump is elected and pursues more rational economic opportunity, a lot of that money will flow back into the U.S. Both because of a lower U.S. Corporate tax rate and because of more investment opportunities resulting from a more growth-oriented economy.

Expect even more money to leave the U.S. if Clit-bitch (or Sanders) is elected.

Remember, capital flight is a feature of socialism or any other collectivist economic policies, otherwise known as kleptocracy.

It is also worth noting that a lot of Chinese capital investment is flowing INTO the U.S. right now. Maybe things balance themselves out afterall.

Anonymous antipater_1 May 20, 2016 4:00 PM  

"Corporations are people."
"Mitt said so".

And so did the Silly Court. Does that mean that corporations can run for political office? Why not if they are just "people".

Blogger Snidely Whiplash May 20, 2016 4:01 PM  

kurt9 wrote:I see a lot of winging about "free trade" on this and some other blogs. I think you guys lack the business experiences to understand the realities of the global marketplace (surprise, surprise, as I think few of you have any actual experience in international business at all). A company that manufacturers semiconductor chips or jumbo jets is necessarily going to sell into world-wide markets. You're not going to have a semiconductor fab or aircraft manufacturing operation in every single country of the world (which is what your calls for autarky would imply).

STOP KICKING THAT STRAWMAN, YOU SADIST! wHAT DID HE EVER DO TO YOU!?!?!

Blogger kurt9 May 20, 2016 4:02 PM  

One of your fellow bloggers has something to say on this phenomenon:

http://captaincapitalism.blogspot.com/2012/08/thats-not-bug-its-feature-of-socialism.html

Blogger kurt9 May 20, 2016 4:03 PM  

STOP KICKING THAT STRAWMAN, YOU SADIST! wHAT DID HE EVER DO TO YOU!?!?!

LOL! I love it!

Blogger Rusty Fife May 20, 2016 4:06 PM  

Andrew E. wrote:People should only invest in public companies if they themselves know how to read balance sheets, income and cash flow statements and all the footnotes therein. And have the time to study and follow the financials and the developments of the companies. If you can't or won't do these things then you have no business investing in stock markets.

The GAAP is a lie. Your balance sheet isn't in this castle.

You really need to get over the idea that you are smart enough to figure out how much a company is lying to you. If it were possible without without a major audit, the Wall Streeters would already be doing it.

Blogger Nate May 20, 2016 4:18 PM  

there is a claim going around that Trump is flip flopping on free trade. I have seen no actual footage or evidence. Just seen the claims. anyone know anything more?

Blogger Snidely Whiplash May 20, 2016 4:25 PM  

Nate wrote:I have seen no actual footage or evidence. Just seen the claims. anyone know anything more?

Just more #NeverTrump bitter losers ranting against their self-imposed exile.
"You'll see, she will rip your heart out of your chest the way she did to me when she didn't acknowledge my superiority!!!"

Anonymous Andrew E. May 20, 2016 4:37 PM  

The GAAP is a lie. Your balance sheet isn't in this castle.

You really need to get over the idea that you are smart enough to figure out how much a company is lying to you. If it were possible without without a major audit, the Wall Streeters would already be doing it.


Ok, so it's not clear from this but I think you're saying that knowing how to read financial statements is pointless since they're all fraudulent anyway? Very possible which only reinforces my point that people shouldn't put their savings in these corporations. No stocks, no mutual funds, no index funds. If every saver in the US did this how much capital would these giant corporations have?

Anonymous Leonidas May 20, 2016 4:44 PM  

Except corporations aren't people, not anymore. Most of our major corporations aren't owned by individuals. Almost all of them are 65% or more owned by institutional investment companies (hedge funds, mutual funds, private capital groups, etc). Worse than that, most of the big companies are majority owned by the same institutional investors. The 6 biggest US banks all have the same institutional investors as their largest shareholders.

Competition? What's that?

Blogger dc.sunsets May 20, 2016 4:44 PM  

@30, no need to look at corp financials. Just look at the oligarchs, lick-spittles, yes-men and well-known crooks they place on corporate boards.

Yes, THESE are the congenital liars, crooks, pederasts and coprophages who cross-board on the multinational might of Corporate America. Does anyone still wonder if the executive suites of all these firms are robbing customers, employees and shareholders blind?
Johnson & Johnson: Charles Prince
Elected 2006
Having served as Chairman and CEO of the nation’s largest and most diversified financial institution, Mr. Prince brings to our Board a strong mix of organizational and operational management skills combined with well-developed legal, global business and financial acumen critical to a large public company.

Mr. Prince, 66, joined the Board of Directors in 2006 and is Chairman of the Regulatory, Compliance & Government Affairs Committee and a member of the Nominating & Corporate Governance Committee. Mr. Prince served as Chief Executive Officer of Citigroup Inc. (financial services) from 2003 to 2007 and as Chairman from 2006 to 2007. Previously he served as Chairman and Chief Executive Officer of Citigroup’s Global Corporate and Investment Bank from 2002 to 2003 and Chief Operating Officer from 2001 to 2002. Mr. Prince began his career as an attorney at U.S. Steel Corporation in 1975. Mr. Prince is a member of the Council on Foreign Relations and The Council of Chief Executives.

Other Public Company Board Service: Xerox Corporation (2008 to present)


From wikipedia:
Charles Owen "Chuck" Prince III (born January 13, 1950) is an American former chairman and chief executive of Citigroup.[1] He succeeded Sandy Weill as the chief executive of the firm in 2003, and as the Chairman of the Board in 2006.[1] On November 4, 2007 he retired from both his chairman and chief executive duties due to unexpectedly poor 3rd quarter performance, mainly due to CDO and MBS related losses, while still receiving a $38m pay package.[2]

Prince left with an exit bonus valued at $12.5 million, in addition to the $68 million he received in stock and options he had accumulated during his career, together with a $1.7 million pension, an office, car and driver for up to five years. During his tenure, the market value of Citigroup dropped by $64 billion.[11] He is still a consultant with Citigroup.

In 2008, Fortune named Charles Prince as one of eight economic leaders "who didn't [see] the crisis coming", noting his overly optimistic statements in July 2007.[12] In January 2009, Guardian city editor Julia Finch identified him as one of twenty-five people who were at the heart of the financial meltdown.[13]

Prince famously said about Citigroup's continued commitment to leveraged buy-out deals, despite fears of reduced liquidity because of the occurring sub-prime meltdown: "As long as the music is playing, you’ve got to get up and dance."

Anonymous Boogeyman May 20, 2016 4:45 PM  

A question from an economics pleb. What would happen to inflation if the corporate tax laws were changed (or something else happened) and all those dollars were brought back home?

Blogger Student in Blue May 20, 2016 5:02 PM  

If every saver in the US did this how much capital would these giant corporations have?

Sounds like you're describing a small investor. People who invest with lots of money on the average do their due diligence, whether that's insider trading or legitimately being knowledgeable about financials, so that's obviously not who you're referring to.

So yeah, if every small investor packed up and went home... it probably wouldn't change a damn thing.

Anonymous Andrew E. May 20, 2016 5:15 PM  

So yeah, if every small investor packed up and went home... it probably wouldn't change a damn thing.

How big is the mutual fund/index fund industry? How big is the 401k industry? These are all small investors.

How big is the hedge fund industry? These are all wealthy investors who don't know they're getting screwed on fees.

Blogger praetorian May 20, 2016 5:19 PM  

We're shipping value out the door, and foreigners are using it to buy up the land our ancestors conquered.

They bought it. Let's see them keep it.

Completely agree with your analysis.

Blogger Lana J May 20, 2016 5:20 PM  

Nate wrote:there is a claim going around that Trump is flip flopping on free trade. I have seen no actual footage or evidence. Just seen the claims. anyone know anything more?

I just listened to the Trump New Jersey speech, which I believe is being used to make those claims. The reason I did so is because there have been plenty of lies told about what Trump said. That's 31 minutes of my life I'll never get back. Trump manifestly did not come out for free trade. He did not flip flop one bit. It's a complete distortion or a selective quote used to trick people. A few relevant quotes:

"I'm a Free Trader...Only if we make good deals!"

"Here is my trade deal. We are going to make great deals for our country."

" You can call it whatever you want to call it."

"NAFTA is the worse trade deal in the history of this country and it's going to be repealed."

Anonymous fop May 20, 2016 5:22 PM  

Does that mean that corporations can run for political office? Why not if they are just "people".

Sure. I'd vote for President Carl's Jr.

Anonymous Fed Up Aussie May 20, 2016 5:23 PM  

@19 debt-as-money can lose value simply if people begin to question its backing

I keep asking people who exactly countries like Australia and America are in debt to and what are these people going to realistically do if Australia or America refuses to pay that debt?

Blogger Student in Blue May 20, 2016 5:26 PM  

How big is the mutual fund/index fund industry? How big is the 401k industry? These are all small investors.

When a sizeable number of mutual funds being toted around are for $10k minimum, and places like TDAmeritrade offer nice stuff for private investors who plop down $1 mil plus like it's no big deal... there is no good way you could describe any of those people as "small investors".

And those people even if mutual funds and 401ks weren't a thing would still have their hand in the market by just straight up hiring or buying a broker to do their work for them.

How big is the hedge fund industry? These are all wealthy investors who don't know they're getting screwed on fees.

If they're smart and realize they're not making a profit off it, they pull the plug. If they're not smart they stop being wealthy.

Blogger Andre B May 20, 2016 5:27 PM  

VD, what are your thoughts on Distributism?

Is it even a possible third way or is it more useful only to remind man, individually, of a more proper, healthier way of living?

Blogger Timmy3 May 20, 2016 5:28 PM  

The money is coming back by the Chinese willing to buy residency and investing in businesses.

Apple is paying dividends by taking on debt. It is buying back stock to boost stock prices. Buying stock and paying back debt will inject money back into the economy although indirectly. They just don't want to pay taxes. Not a good citizen.

Anonymous Andrew E. May 20, 2016 5:38 PM  

Let me put it this way: if you're not getting a private sit down in a boardroom on the top floor of a major bank in a major city with a small army of bankers on the other side of the table walking you through their 2-hour pitch on their ideas for your money, then you are a 'small' investor.

And if you're a small investor then you have no business investing in equities unless you personally understand the business(es) you're investing in and have the time, inclination and ability to follow it closely on a regular basis. No mutual funds, no index funds, etc.

Blogger praetorian May 20, 2016 5:38 PM  

I know the binary thinkers will hate this, but this is an area where we should actually read some Marx: *if* what we have today can be described as capitalism, or at least the closest that can be expected given the current political constraints, then there is obviously a tendency towards the accumulation of capital in the financial sector, leading to political crisis. His political and economic *solutions* and his description of value creation are obviously insane, but he did appear to be on to something with his description of some of the problems.

Anonymous WinstonWebb May 20, 2016 5:46 PM  

I'd vote for President Carl's Jr.

A Hot Carl in every pot?

Anonymous WaterBoy May 20, 2016 5:49 PM  

Vox: "the distribution of wealth is a legitimate societal problem and it is only going to get worse"

On a related note:

"This should not come as a surprise to economists. I’ve lost count of the times I’ve written that globalization reduces inequality among countries and increases inequality within countries. The wealthiest, most highly educated, and most internationally connected people are always the best equipped to claim the biggest gains from trade. In poor countries, these gains from trade often come from the exports of labor-intensive industries, and the millions of people who work in these industries may benefit as well. That used to happen here, too, but not anymore.

In the United States, the big losers from the current wave of globalization have been working- and middle-class people, as Branko Milanovic of the City University of New York details in his new book, Global Inequality. Many of them have gravitated to the insurgent campaigns of Trump and Sanders, whose proposals have left economists shaking their heads and wringing their hands.
"

Blogger SciVo May 20, 2016 5:54 PM  

Goodnight wrote:And free trade doesn't benefit a country if the money collected for its exports never enter it.

Yes, yes. A couple of years ago I was talking to a friend about the economy. He was worried about hyperinflation - which would start just any day now - because of QE. I kept trying to explain the concept of velocity of money, and that between financials sitting on parked cash and multinationals moving more and more profits offshore that for all practical purposes our money supply was shrinking. He just couldn't get the concept.


Show him The Chart That Explains Everything. QE funneled money to the investment class, which spends its next marginal dollar on assets. So your friend wasn't completely wrong, but neglected to anticipate asset price inflation instead of retail price inflation.

And the story doesn't stop here. This can't go on forever.

Blogger Student in Blue May 20, 2016 5:59 PM  

@46. WinstonWebb
A Hot Carl in every pot?

The next best thing to voting for Mt. Dew Comacho.

Anonymous BigGayKoranBurner May 20, 2016 6:00 PM  

This is just counting non financial companies. The big problem is the (((treasury))) printing limitless cash and giving their tribe members first pass with the cash before the extra money causes inflation.

I have to admit that I was wrong about moslems. I have said many times that moslems hate everything about the west except the benefits office but I was in error
Darfur Sudanese rapefugee burns welfare office to the ground because they didnt give him a free house immediately
original http://france3-regions.francetvinfo.fr/alpes/haute-savoie/annecy/sans-logement-un-refugie-brule-des-bureaux-de-la-mairie-d-annecy-1000171.html

translation
https://translate.google.de/translate?sl=fr&tl=en&js=y&prev=_t&hl=de&ie=UTF-8&u=http%3A%2F%2Ffrance3-regions.francetvinfo.fr%2Falpes%2Fhaute-savoie%2Fannecy%2Fsans-logement-un-refugie-brule-des-bureaux-de-la-mairie-d-annecy-1000171.html&edit-text=

Blogger RobertT May 20, 2016 6:32 PM  

The corporate form of business is a great boon to large companies (originally, the Dutch East Indies Company) and also in more recent times for small, closely held companies trying to take advantage of the indecipherable matrix known as tax law to save boatloads of taxes. Over time everything (corporate law, tax law) eventually gets adapted to benefit a select few. I love the tax code and the corporate form of doing business because that's the game i play, and using these tools and some innovative thinking, I can deliver remarkable results. But I can see that both reserve their benefits to a very small segment of the population. However, if you change just these particular laws to clear out all those barnacles, it would not be very many years before Congress rebuilt a new system that delivered similar benefits, because the pressure would be unrelenting. The secret is cutting tax rates dramatically to relieve that pressure. Lacking that, you’re just whistling past the graveyard.

Blogger tz May 20, 2016 7:04 PM  

@42 - The key to Distributism is it makes everyone a businessman and entrepreneur, and they will vote differently. If they can do even simple crafts or a sandwich card and make and keep $10k per year, they won't want even the "food truck" regulation locally, much less FDA/USDA nationally.

If you encourage people to merely be wage-slaves, they will vote to pamper themselves at the expense of the employers. If they are both businessmen and employers as well as employees all sides have to work together differently.

But as to these corpseorations hoarding cash, they are often held up as being the "free market" - Apple is providing goods and services on the free market... but then they turn around and say they are overregulated so aren't doing the right thing because they can't. Which is it? A cellular oligopoly, an OS oligopoly, all regulated with huge barriers to entry isn't a free market.

Blogger rumpole5 May 20, 2016 7:24 PM  

We could take some measures to bring that Money home. For instance, adopt a new currency that requires "registration" of the old currency at offices in the USA for exchange to the new currency before an expiration date, and were a reasonable tax (3%?) could be imposed. Cash registered by natural person citizens could be taxed after an exemption of, say $20,000. Up to 500,000, Aliens and non-natural citizens would be taxed on the full amount. The amount raised would then be distributedas a "tax refund" to all natural USA citizens who had paid Federal taxes the previous year.

Anonymous Eric the Red May 20, 2016 7:37 PM  

@9 A.B.Prosper
"Regulatory controls and prohibition are how distribution is maintained and a race to the bottom is prevented"

Really? Instead, a grossly bloated regulatory environment such as corporatists have put in place now, restricts entry by potential small-to-middle competitors, and stacks the deck against existing ones from ever growing larger.

Anonymous Eric the Red May 20, 2016 7:57 PM  

kurt9..
You have myopia with your little 7-employee company. At least one of your strawmen is that the vast bulk of manufacturing will somehow stay here, instead of being hollowed out by the siren song of relocation to low-wage countries.

Blogger Rusty Fife May 20, 2016 8:13 PM  

Andrew E. wrote:Ok, so it's not clear from this but I think you're saying that knowing how to read financial statements is pointless since they're all fraudulent anyway? Very possible which only reinforces my point that people shouldn't put their savings in these corporations. No stocks, no mutual funds, no index funds. If every saver in the US did this how much capital would these giant corporations have?

Correct, the documents are fraudulent.

The vast majority of the public that is invested in the market aren't retail investors. They are ponzi scheme under-funded pensions which are being paid to make good decisions.

Arguably, there are a bunch of folks in 401ks; the products pushed for them are either index funds or 'years to retirement' managed funds.

ZIRP and inflation are stealing any value that can be saved through T-bills or CDs.

The states tax away all gains on property and only so many can get cash flow on rents.

Why are you blaming the chickens for the farmer letting the fox in the hen house?

Anonymous User May 20, 2016 8:38 PM  

The economy (or ledger game) has become a computer game. In itself that's not a bad thing, since technology is amoral. Vox demonstrates deep understanding here.

The map is not the territory. We should always focus on real goods and real services and not be distracted by abstractions. The state and corporations and every other legal abstraction are all creations of the people and one way or another their existence is predicated on us. What matters is their pragmatic effect.

The majority of the public never invests at all, they only perform asset swaps to adjust the contents of their savings portfolio. Investment is a seminal activity, that's how to recognize the difference.

Blogger Rusty Fife May 20, 2016 9:05 PM  

Andrew E. wrote:Let me put it this way: if you're not getting a private sit down in a boardroom on the top floor of a major bank in a major city with a small army of bankers on the other side of the table walking you through their 2-hour pitch on their ideas

Bankers in a board room selling their ideas for your money? Sounds like a sucker's bet to me.

Anonymous Jack Amok May 20, 2016 9:26 PM  

The key to Distributism is it makes everyone a businessman and entrepreneur, and they will vote differently.

Nope. At least 60% of men and 95% of women are utterly emotionally incapable of being entrepreneurs. The risk-taking necessary paralyzes them with fear. That would be like telling a bunch of people with acrophobia that everyone has to work as window washers on sky-scrapers.

Their voting patters would get even worse, as they would frantically grasp for any safety blanket any con artist promised.

A majority of people are psychologically uncomfortable with being anything but a wage slave. It is an aspect of human nature that isn't going to change. Of course, envy is another aspect of human nature, and the wage-slaves are irrationally envious of the wealth successful entrepreneurs accumulate.

The solution is to protect entrepreneurs from the envy of the proles while also protecting the proles from exploitation by the entrepreneurs. Not an easy balance, but that's what we need.

Besides, the issue raised here by Vox isn't really anything about entrepreneurs vs workers. It's about rent-seekers ripping off both the entrepreneurs and the proles. We need solutions that unite the entrepreneurs and workers against the grifters.

Blogger Rusty Fife May 20, 2016 9:47 PM  

OT and more interesting innumerate analysis by the reporters:

"Megyn Kelly Presents” averaged 4.8 million viewers, according to Nielsen.

Consider the segment after Trump was about a black transvestite... I wonder what the minute-by-minute ratings were?

Blogger Stephen St. Onge May 20, 2016 10:24 PM  

@ 11.

The reason people don't demand dividends is the key to this problem. Back during the New Deal, the class-hatred, 'Stick it to the rich' nonsense led to a change in law making dividends taxable. Before that, any amount of money received as a corporate dividend was tax-free. NOTE VERY WELL: this is after the corporation has already paid corporate income tax on their profits.

So, from the stockholder's point of view, it makes more sense in the short run for the company to keep the cash and use it to increase the value of your shares. You pay no taxes till you sell, and when you do, the profit on the sale is a capital gain, taxed at a reduced rate.

In the long run, though, it generates monopoly and inefficiency, and is bad for the economy.

The solution is to make dividends tax free again. This would lead to stockholders forcing the companies to pay out that big one-time dividend, and to make regular, reasonable dividend payments, rather than horde the cash.

Anonymous mature craig May 20, 2016 10:25 PM  

I just hope free market capitalism realizes that the retirement age is 67 and people age 35 to 67 need to make a living too



Blogger Stephen St. Onge May 20, 2016 10:27 PM  

Oh, it would help a great deal if there were punitive taxes on excess money held by the corporations, AFTER making dividends tax-free again.

Blogger Rusty Fife May 20, 2016 11:13 PM  

mature craig wrote:I just hope free market capitalism realizes that the retirement age is 67 and people age 35 to 67 need to make a living too



Nah, those old codgers are over their animal spirits, trapped in debt, and too old to riot.

Anonymous Fed Up Aussie May 20, 2016 11:26 PM  

Two stories for you Vox:

1. Hillary's email: destroy syria for israel
http://archive.is/oSLJe

2. Eagles of Death Metal banned from perfomring at several French festivals are talking about how he saw muslims cheering the Bataclan massacre

https://archive.is/V6R7t

Anonymous Fed Up Aussie May 20, 2016 11:32 PM  

@19 debt-as-money can lose value simply if people begin to question its backing 

I have been asking who exactly Australia, America et al are in debt to and what exactly those creditors would do if we simply refused to pay back the debt? No one seems to be able to tell me

Blogger Rusty Fife May 20, 2016 11:37 PM  

Fed Up Aussie wrote:I have been asking who exactly Australia, America et al are in debt to and what exactly those creditors would do if we simply refused to pay back the debt? No one seems to be able to tell me

I don't know the totals, but a lot of the T-bills are owned by the US government to pay off Social Security. The government spends too much now, and sells T-bills to the SS fund. This Ponzi scheme holds up just as long as SS inflows are greater than outflows. I believe it flipped sometime last year.

Blogger Were-Puppy May 20, 2016 11:43 PM  

@6 Josh

My friends!
---

That was actually John MittCains line :P

Blogger praetorian May 21, 2016 1:08 AM  

Companies should be treated like big LLCs: dividends should be deductible to the company and flow through to the owners. There is no reason George Soros and Grandma Em should pay the same rate on dividends.

Blogger Kona Commuter May 21, 2016 1:50 AM  

Apple doesn't pay tax in Australia either.

Anonymous Shekelmaster May 21, 2016 6:19 AM  

Is my understanding correct that when the article talks about "cash" it means no such thing but money in general? The way it's written it kind of sounds like the have huge vaults of 20 dollar bills.

Blogger Ahazuerus May 21, 2016 7:41 AM  

The friedmanites took a libertarian ideal, free trade, and championed it in a corporatist (fascist) context, knowing the corporates would put their lobbying money and think-tank intellectual heft behind it, reaping freely the rewards thereof but refusing to even mention the rest of the program which would have spread those rewards more evenly throughout the people who actually earned them.

Thus free trade as practiced has become a means of embedding and deepening the structural inequities in the economy.

But such inequities are not sustainable, and what cannot be sustained will not be. A crisis is coming, and one long in the making. Every time we kick the can a little further down the road, trying to avoid the consequences of our policy, we make the inevitable failure that much worse.

C'est la vie.

Blogger Zen Trader May 21, 2016 9:55 AM  

Corporations are LEGAL persons, always have been. There's a difference between that and a natural person.

The problem isn't that corporations are people, the problem is that we've allowed widespread regulatory capture and its attendant corruption.

Blogger Slaw May 21, 2016 10:09 AM  

Then, wouldn't the problem be the oppressive "corporate" tax rate, which incentivizes corporations to maintain profits overseas? And not the bogus "distribution" of wealth?

Blogger Zen Trader May 21, 2016 10:19 AM  

Another issue is that banks don't make much money on lending at the moment, as rates are historically low, and Dodd-Frank basically stopped them from making money on debit card transactions.

The only way they maintain profits right now is because they've been cutting costs like crazy. Think lots of job losses and automation.

Blogger Zen Trader May 21, 2016 10:45 AM  

I think you've misunderstood. Nobody here is against international trade. The point is that a nation should engage in international trade for the benefit of its people, and not just a wealthy few, aka economic nationalism.

To that end, corporations are a fiction, an abstract construct created and enforced by the laws of the US in the case of Apple, for example.

The reason that the state allows corporations to be created is that they are enormously beneficial to the economy and thus the people of that state. The problem is that we've allowed regulatory capture via bribery, and these corporations arguably no longer serve the people who grant them their existence and power.

This is like you building a robot to go out and bring in an income, and you find out later that it's stashing most of it in another account. The robot is your property. Do you stand for that?

Blogger Zen Trader May 21, 2016 10:54 AM  

It's not that our ruling class are fools, it's that they've lost all sense of accountability and are selling out their countrymen. They figure none of this stuff matters because they can use their wealth to shield themselves from the downsides of demographic replacement. Gated communities, private schools, etc, and their new surfs can be paid to defend them against the people they've betrayed.

This explains why they've cast aside the rule of law now that people have become aware of the immigration issue. They are packing as many serfs in as possible before we can put a stop to it. They'll be used against us later, first to outvote and later outfight.

Blogger rycamor May 21, 2016 11:20 AM  

Michael Maier wrote:What percentage of the total money supply is being discussed here?

1/3 of the cash held by 5 companies is how many drops out of the bucket?


The article says the total cash held by non-financial companies is $1.7 trillion, which is significant considering that it is approximately 10% of the US GDP.

Blogger Ahazuerus May 21, 2016 11:37 AM  

The distribution is what it is. You can't sensibly call it bogus. But it's a symptom of corruption, of policy deliberately gerrymandered to destroy the foundations of civilisation; the middle class.

Blogger Zen Trader May 21, 2016 11:51 AM  

I think you've misunderstood. Nobody here is against international trade. The point is that a nation should engage in international trade for the benefit of its people, and not just a wealthy few, aka economic nationalism.

To that end, corporations are a fiction, an abstract construct created and enforced by the laws of the US in the case of Apple, for example.

The reason that the state allows corporations to be created is that they are enormously beneficial to the economy and thus the people of that state. The problem is that we've allowed regulatory capture via bribery, and these corporations arguably no longer serve the people who grant them their existence and power.

This is like you building a robot to go out and bring in an income, and you find out later that it's stashing most of it in another account. The robot is your property. Do you stand for that?

Blogger Zen Trader May 21, 2016 11:51 AM  

Another issue is that banks don't make much money on lending at the moment, as rates are historically low, and Dodd-Frank basically stopped them from making money on debit card transactions.

The only way they maintain profits right now is because they've been cutting costs like crazy. Think lots of job losses and automation.

Blogger Zen Trader May 21, 2016 11:51 AM  

Corporations are LEGAL persons, always have been. There's a difference between that and a natural person.

The problem isn't that corporations are people, the problem is that we've allowed widespread regulatory capture and its attendant corruption.

Anonymous jacopo May 21, 2016 12:32 PM  

The money often is repatriated, but only to be taxed at the much lower cap gains rate. A corp can borrow against its offshore cash to fund stock buy-backs driving up share prices and enriching stockholders, C-suite executives, and investment bankers. The corp uses its offshore cash to pay off the debt and write it off as a business expense thus evading U.S. corporate income tax rates.

Blogger Blume May 21, 2016 12:59 PM  

Legal entities not persons. Yall ate falling for the same gender/sex redefinition the left does.

Blogger Groot May 21, 2016 1:31 PM  

@80. Zen Trader:
"This is like you building a robot to go out and bring in an income, and you find out later that it's stashing most of it in another account. The robot is your property."

If it's already smarter than you, it's time for an epistemic review of who owns whom, and who's been owned.

Blogger Blume May 21, 2016 1:58 PM  

Legal entities not persons. Yall ate falling for the same gender/sex redefinition the left does.

Blogger Harold May 21, 2016 8:59 PM  

Production may come back here to the United States, but jobs won't come with it. An example would be Hostess and Twinkie production (although this was entirely within the U.S.) They were produced by 14 plants and 9000 employees. Now one plant and 500. http://www.forbes.com/sites/stevenbertoni/2015/04/15/twinkie-billion-dollar-comeback-hostess-metropoulos-apollo-jhawar/#1bb4e1402562

And there are more innovations coming down the line that will increase production with fewer employees. 3-D printing for one. 3-D house printing has already been demonstrated. You'll soon be able to print any small plastic or possibly even ceramic object for home use in your home. I can see larger printers for things like lawn furniture and playground equipment in your local fabrication shop. Walk in, select what you want, pay in advance, and your design goes in the queue. Pick it up the next day.Or the printer comes to your house, and your new garden gazebo is printed in place.

Anonymous mature-Craig May 22, 2016 11:22 AM  

Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco System (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015,,

cash equivalent:

-Cash equivalents are investment securities that are short-term, have high credit quality and are highly liquid.

-cash equivalents are one of the three main asset classes, along with stocks and bonds. These securities have a low-risk, low-return profile. Cash equivalents include U.S. government Treasury bills, bank certificates of deposit, bankers' acceptances, corporate commercial paper and other money market instruments

Anonymous mature-Craig May 22, 2016 11:26 AM  

Money Market:

A money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).

The money market is used by a wide array of participants, from a company raising money by selling commercial paper into the market to an investor purchasing CDs as a safe place to park money in the short term. The money market is typically seen as a safe place to put money due the highly liquid nature of the securities and short maturities, but there are risks in the market that any investor needs to be aware of including the risk of default on securities such as commercial paper.

\


Blogger Akulkis May 23, 2016 10:41 PM  

@17

"These corporations need cash reserves otherwise how would Apple have just shelled out $1 bil­lion in cash to buy Chinese Uber competi­tor Didi Chuxing."

And a computer company needs to get into the taxi business, why, exactly?

Remember, *you* said "NEEDS."

Anonymous JT May 24, 2016 4:24 PM  

This argument seems to constantly come up. I read a fair amount of the comments, and saw some mention of the U.S. Tax System being to blame.

There really wasn't much explanation about it, so I'll hammer on it, cause this is one of my hot button issues.

The problem isn't that Apple, Microsoft, Alphabet/Google have craploads of money held offshore. That's a symptom.

The problem is that the United States has a totally bass-ackwards tax system that wants to tax everything. This is the complete opposite of most tax structures (Europe) where only money made in the country gets taxed. Everything else is the corporations.

If the U.S. adopted a more reasonable tax structure then that money would probably land here with a splash. A big 1+ Trillion splash that would result in special dividends to many a shareholder, bonuses, and then it'd start settling down to corporations expanding their presence here, because we'd effectively neutralize the advantages gained by holding that money overseas.

(And if it wasn't taxed at a corporate-level, we'd end double taxation.)

You want that money back in the U.S. Then you need to let the corporations bring it back. Not erect a 35%-tax barrier that makes it cost prohibitive to bring it back.

Not that Ireland and all the tax-havens in the Carib. would care much for what would happen if the U.S. suddenly declared foreign earnings tax-exempt.

It would also end the current glut of transnational mergers, by eliminating the benefits. There's nothing to gain by being European if you don't see a net tax benefit. Might as well remain domiciled in the United States.

Me, personally, I think after the massive special dividends, corporations would start looking for other ways to invest that money, like new buildings, and bringing more HQ jobs here. This means more personal income taxes for the U.S.

No matter what Uncle Sam gets his pound of flesh.

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