You may have heard recently that U.S. companies have emerged from the financialcrisis
health, that they've paid down their debts, rebuilt their balance sheets and are sitting on growing piles of cash they are ready to invest
in the economy
You could hear this great news pretty much anywhere
-- maybe from Bloomberg, which this spring hailed the 'surprising strength' of corporate balance sheets. Or perhaps in the Washington Post, where Fareed Zakaria reported that top companies 'have accumulated an astonishing
$1.8 trillion of cash,' leaving them in the best shape, by some measures, 'in almost half a century.'
Or you heard it from Dallas Federal Reserve President Richard Fisher, who recently said companies were 'hoarding cash' but were afraid to start invest
ing. Or on CNBC, where experts have been debating what these corporations are going to do with all their surplus
loot. Will they raise dividends? Buy back shares? Launch a new wave of mergers and acquisitions?
It all sounds wonderful for invest
ors and the U.S. economy
. There's just one problem: It's a crock.
American companies are not in robustfinancial
shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression.
You'd think someone might have noticed something amiss. After all, we were simultaneously
being told that companies (a) had more money than they know what to do with; (b) had even more money coming in due to a surge in profits; yet (c) they have been out in the bond market borrowing as fast as they can.
Does that sound a little odd to you?
A look at the facts shows that companies only have 'record amount
s of cash' in the way that Subprime Suzy was flush with cash after that big refi back in 2005. So long as you don't look at the liabilities, the picture looks great. Hey, why not buy a Jacuzzi?
According to the Federal Reserve, nonfinancial
firms borrowed another $289 billion
in the first quarter, taking
their total domestic
debts to $7.2 trillion, the highest level ever. That's up by $1.1 trillion since the first quarter of 2007; it's twice the level seen in the late 1990s.
The debt repayments made during the financialcrisis
were brief and minimal: tiny amount
s, totaling about $100 billion
, in the second and fourth quarters of 2009.
Remember that these are the debts for the nonfinancial
s -- the part of the economy
to be in better shape. The banks? Everybody knows half of them are the walking dead.
Central bank and Commerce Department data reveal that gross domestic
debts of nonfinancial
corporations now amount
to 50% of GDP. That's a postwar record. In 1945, it was just 20%. Even at the credit-bubble peaks in the late 1980s and 2005-06, it was only around 45%.
The Fed data 'underline the poor state of the U.S. private sector's balance sheets,' reports financial
analyst Andrew Smithers, who's also the author of 'Wall Street Revalued: Imperfect Markets and Inept Central Bankers,' and chairman of Smithers & Co. in London.
金融分析师史密瑟斯（Andrew Smithers）在报告中写道，美联储数据"凸显美国民间企业财务状况较差"。 史密瑟斯是伦敦Smithers & Co.的董事长，并且是《重估华尔街：不完美的市场和无能的央行行长》（Wall Street Revalued: Imperfect Markets and Inept Central Bankers）一书的作者。
'While this is generally recognized for households,' he said, 'it is often denied with regard to corporations. These denials are without merit and depend on looking at cash assets and ignoring liabilities. Cash assets have risen recently, in response
to the fall in inventories, but nonfinancial
s' corporate debt, whether measured gross or after netting off bank deposits and other interest-bearing assets, is at peak levels.'
By Smithers' analysis
, net leverage is nearly 50% of corporate net worth, a modern record.
There is one caveat to this, he noted: It focuses on assets and liabilities of companies within the United States. Some U.S. companies are holding
net cash overseas
. That may brighten
the picture a little, but the overall effect is not enormous
, and mostly
just affects the biggest companies.
That U.S. companies are in worse financial
shape than we're being told is clearly bad news for those thinking of invest
ing in U.S. stocks or bonds, as leverage makes invest
ments riskier. Clearly it's bad news for jobs and the economy
But why is this line being spun about healthy
balance sheets? For the same reason we're told other lies, myths and half-truths: Too many people have a vested interest in spinning
, and too few have an interest in the actual
Journalists, for example, seek safety in numbers; there's a herd mentality. Once a line starts to get repeated
, others just assume it's correct and join in.
Wall Street? It's a hustle
. This healthy
balance-sheet myth helps sell stocks and bonds. How many bonuses do you think get paid for telling customers the stark facts, and how many get paid for making the sale?
You can also blame our partisan
age too. Right now, people on the right have a vested interest in claiming businesses are in healthy
shape. That makes the saintly private sector look good, and demonizes President Barack Obama and Big Government for scaring away invest
ment. Vote Republican! Meanwhile, people on the left have an interest in making businesses sound really healthy
too: If greedy
companies are hoarding cash instead of hiring people, they can cry 'Shame on them! Vote Democratic!'
As ever, the truth is someone else's problem and no one's responsibility.
When it comes to the economy
, let's just hope the public is too hopped up on painkillers and antidepressants to notice. If they knew what was really going on, there'd be trouble.