In 2008, corporations were struggling and laying people off left and right, but now, corporations have more money in the bank than they know what to do with. American companies literally have enough money to buy the Dallas Cowboys 437 times, and the amount of money sitting in corporate vaults is at an all-time high at $1.4 trillion. One great part about the massive amount of money that American corporations have in the bank is that this means the corporations are doing well in the stock market and in the economy. This is also a good thing because the corporations might be better prepared in case there is another epic financial collapse, and it might keep them from asking for bailouts.
The bad part about the trillions of dollars these corporations have is that most of the corporations are not spending the money, which means they are not hiring people at a fast rate. The corporations are also not investing that much money into the research departments or new machinery, and this might not be considered a good thing since innovation is the key to business growth and stability. The oil industry has partially something to do with this, since oil has decreased so much within the past year, and this means that the oil companies are going probably not going to be part of the new spending spree.
If the companies were spending this money, then it would actually begin to rally the markets even more, and it would also make the shareholders happy. Shareholders want to see the companies spending money on research and on bringing in new people, so leaving the money sitting in the bank and not even getting a piece doesn’t always sit well with them. One of the good parts about this is that companies will have to start spending some of this money, especially on computers and other pieces of electronics. Since technology moves forward so quickly, the corporations in America need to continue buying new products in order to keep up the pace with competitors.
When you look ahead at all of the money in the bank, a lot of corporations will also have to start spending money on renovations and new buildings. Most companies have been holding off on getting work done the past few years as they waited to see what the economy was going to do. Now, since the economy is rebounding and it seems the recession is over, the companies have a better sense of what the direction of the nation is going. The projections is that corporations will increase spending from 3 percent to 6 percent within the next year, although it still might not mean companies will increasing their hiring. It is a wait and see approach at this point, since it’s important for the corporations to keep some money in the bank, however it looks like corporations are getting ready to start picking up the pace in the spending department.