corporate cash hoarding and low interest rates

The Economist recently provided a primer on the existence of low interest rates while corporations continue to hoard cash.  Our current circumstance can be broken into two contrasting philosophies, provided that you are a believer of open market signaling.

1)The private sector may be signaling that there is little ROI if they were to invest in training, capital equipment, and research and development.  As a result, it may be wise for the government to follow a similar strategy.

2)The private sector may be hoarding cash and treasuries in hopes of driving interest rates down so that the government can fund investments into infrastructure and r&d.

The first philosophy appears to be the strategy that was employed since the millennium.  The second appears to be a more hopeful and ideological philosophy that had be employed in many nations around the world post WWII.  There may be a resurgence in this.

It is very difficult to think of capital improvement projects in America.  Let me know if you have any ideas.

 

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