U.S. banks have been holding about $1 trillion of excess reserves for the last two years, while American corporations are flush with $3 trillion in cash.
What do they use this money for? Banks and institutions with access to the Fed’s cheap money are pumping up commodities and stocks to make their quarters, while corporations, facing higher input costs in the form of runaway commodity prices, are busy engaging in M&A’s (which typically means “job rationalization”), and share buybacks to juice up earnings per share.
Meanwhile, stagnant wage and hiring trends failing to keep pace with skyrocketing food and energy costs for consumers, coupled iwth higher input costs, such as fuel, hitting companies’ bottomline, will only further cut into growth prospects, and even the purchasing power of consumers and their overall standard of living.” Read more.
“Fed’s Bullard: Full of Self-Contradictions”
Dian L. Chu
Benzinga, December 21, 2010.
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