Quoting the Crisis

» Capital drought

U.S. corporations are flush with cash. As of the end of the third quarter, they had $1.8 trillion in cash, bonds, and other liquid financial assets on hand—and I’m talking about nonfinancial corporations, not banks or insurance companies. Profits are very high, and firms are gushing with cash flow. But they’re not investing all that much—in things, that is, like buildings and machines. Usually, corporate capital spending tracks closely with cash flow (profits plus depreciation allowances). Firms typically invest all their cash flow, and very often more (borrowing the difference). Over the long term, in fact, capital expenditures have slightly exceeded cash flow by 0.2% of GDP