Home > Uncategorized > US corporations holding $2.1 trillion in cash overseas

US corporations holding $2.1 trillion in cash overseas

from David Ruccio

According to NBC news [ht: db], U.S. corporations are for the first time holding more than $2 trillion overseas, a sixfold increase over the past 12 years.

That total is now greater than the amount held within the United States, which totals just under $1.9 trillion.

fredgraph

Or, to put things in perspective, the $2.1 trillion in overseas cash amounts to about 80 percent of total corporate investment (technically, nonresidential fixed investment) during 2013.

It is a portion of the surplus captured from workers in the the United States and around the world that could be used to create jobs and improve the infrastructure—and is currently not being used for that purpose. Instead, it’s being hoarded as cash for corporations to do with it what they will, when they will.

The $2.1 trillion in corporate cash held overseas is, right now, on holiday.

  1. Bruce E. Woych
    November 17, 2014 at 10:24 pm

    Does this include Off-Shore hidden cash? I don’t see how that can be the total amount.

  2. Honey boo boo
    November 18, 2014 at 11:19 am

    The Corporate bodies can not find suitable investment opportunities, is that the way to interpret it? If they cannot find lucrative investments, but rather pile up cash, it seems we are back in 1928-29, however this time the working capital is not speculated away in the stock market, but awaits the blowout and depression. The question is if the companies will have any Money when their banks go bankrupt? Have they started investing in their own vaults as a precautionary measure for this father of all depressions?
    Germany did not get their gold back from the US, what makes the Corporations Think they will be able to repatriate their earnings?

  3. November 22, 2014 at 3:02 pm

    Re: Bruce: good Question. Answer: No, the cash that’s being discussed here is not individual / family wealth that someone decided to hide in the Cayman Islands and shelter from taxes. That’s something entirely different (and a much smaller amount). These are retained corporate earnings (post-foreign tax; pre-US tax). They are outside the US tax net, thus no tax evasion at play. The money is taxable in the US only when repatriated.

    Re: Honey Boo Boo. There are abundant ways a US multinational corporation can invest / reinvest profits domestically. These corporate earnings do not accrue offshore for lack of opportunity onshore. The explanation, rather, is firms’ behavioral response the US tax system. If the money remains offshore, no US corporate tax; the moment the money is repatriated onshore (typically in the form of an inbound dividend from a foreign subsidiary to the US parent company) the money is taxable in the US. The firms’ rational behavior response to this quirk of US tax code is keep the money outside the the US (known in tax community as “the Lock-out Effect”.).

    Good questions, thanks for reading.

  4. November 24, 2014 at 5:35 pm

    Robert would you explain to your readers the concept of monetary sovereignty so they will understand why we all should oppose taxation for the purpose of funding the Federal government. Taxes serve to manage aggregate demand, income distribution and other purposes, none of which has anything to do with paying the Federal government’s bills.

  5. November 26, 2014 at 11:32 pm

    Calling it “cash” is how economists and others deceive themselves. Money is created when someone promises to pay it back by a certain time. What is stashed overseas are the timed debts of borrowers to whom that money will never be available except as another loan.

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