The WSJ reported that nonfinancial companies held more than $2 trillion in cash on balance sheet at the end of June based on a Federal Reserve report released last Friday, its highest level since 1963 accounting for 7% of corporate balance sheets. This is up more than $88 billion from the end of March.
The data presented by the Federal Reserve also shows that U.S. households' net worth fell to $58.5 trillion in the second quarter, down $149 billion from the first quarter. The decline in consumer net worth is likely to keep companies cash on the sidelines despite the Fed's attempts to incentivize investment with near 0% interest rates.
What's also concerning is the money supply remains at all time highs showing that the Fed's usual recession fix (ie increasing money supply and lowering interest rates) is not working. We should be questioning if additional monetary stimulus will have the desired effect.
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| Source: Wikipedia; Federal Reserve. |
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