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The Progressive Economics Forum

Corporate Cash Stash Surpasses National Debt

Today’s National Balance Sheet Accounts indicate that the amount of cash held by private non-financial corporations in Canada soared from $591 billion in the third quarter of 2013 to $626 billion in the fourth quarter of 2013. Corporate Canada’s accumulated stock of cash now exceeds the federal government’s accumulated deficit, which was $612 billion at the end of 2013.

Corporate Canada’s cash stash had been on track to exceed $600 billion at the start of 2013, but Statistics Canada narrowed its definition of “total currency and deposits.” Even under the new definition, this hoard of dead money surpassed the $600-billion mark by the end of 2013.

The corporate sector’s aggressive accumulation of cash helps to explain the lack of investment and employment growth. It also strengthens the case for reversing corporate tax cuts to fund needed investments in public services and infrastructure. If corporate Canada will not invest its dead money, the government should resuscitate some of it.

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Comments

Comment from Anthony
Time: March 17, 2014, 8:48 am

Canada’s economy remains demand-depressed, which, one would assume, has led to the cut in corporate spending. Consumer spending is still somewhat high, historically speaking, and unlikely to get much higher; the federal government long ago turned away from deficit spending; and inflation has been dangerously low since the recession. The prospect for growth in the corporate sector, thus, looks somewhat dim. In light of this, it makes little sense from a policy perspective to begin raising corporate taxes. Yes, the federal revenue picture would improve, but it’s highly unlikely the Harper government would use any tax wind fall to increase public spending, or to begin a new round of stimulus. It still seems to me that the best course of action would be to petition the Bank of Canada to relax its obsession over inflation, and signal that it will tolerate an inflation rate as high as 4% or 5%. That, coupled with a weakening Canadian dollar, would give corporations some reasonable expectation of rising prices in the future, and a reason to begin investing again.

Comment from Paul Tulloch
Time: March 18, 2014, 2:09 pm

I am not sure why the labour rep economists keep connecting this to dead money. It is not dead- it is engaged in off balance sheet derivative trading. Not sure what the agenda is with making it out that it is dead money- it is indeed fully engaged in speculative financialization of the economy. Jimbo, you wrote the book on some of that. In fact it is indeed off balance sheet activity- it is pretty obvious so I am not sure why we cannot at least raise it within the public discourse as I an thinking you are doing the corporations a favour by not implicating them in this financialized economy. Many estimate that the GDP of most developed economies is near 40% of this wealth generating activity. We know from the Bank of international settlements that over $640 trillion is tied into the derivatives of various structures- whether they be FOREX, Credit default swaps, commodity futures, equities, interest rate swaps, being the large vehicles.

So if you believe that this massive chunk of money is sitting there dead in some bank account and you promote that it is- you are basically buying into mantra that the corporate world is innocent in this building of economy based on fincialized value adding which is not sustainable.

I hope that we could reconsider this dead money mantra!

Paul

Comment from John Brennand
Time: March 18, 2014, 11:53 pm

Not to mention the record high amounts of corporate deferred taxes.
These deferrals are often based on proposed investment, both capital and general expansion. What makes this seem close to, if not actually, criminal is the frequency with which these investments get put off repeatedly until Canada Revenue Agency writes off the tax obligation.
Too bad the rest of us are left on the hook.

Comment from david schroeder
Time: March 23, 2014, 9:27 am

so Paul if this so called “dead money” is really off balance sheet speculative financing why do these companies get to file “clean” audit statement year after year??

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