The Price of Safety
In my latest feature " The price of safety ", co-written with Frances Coppola, we take a look at an issue I have been closely following over the past few years - the economic impact of corporate cash hoarding. To my mind the story is a crucial one to help explain why more than five years since the start of the financial crisis Western economies are still struggling to achieve meaningful growth. For me the key to understanding this point is an appreciation of sectoral balances. The concept was eloquently summarised by Martin Wolf in 2011 : "If the government wishes to cut its deficits, other sectors must save less. The questions are 'which ones' and 'how'. What the government has not admitted is that the only actors able to save less now are corporations." Since the onset of the crisis executives of cash-rich firms (along with a number of commentators) have argued that they have good reason to build up capital buffers. Macro threats such ...