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by CriticalSection 3357 days ago
Industrial capacity utilization is currently less than 76%, which is historically low. So about a quarter of invested capital is sitting idle currently ( https://fraser.stlouisfed.org/scribd/?toc_id=296052&filepath... ) ( https://www.federalreserve.gov/releases/g17/revisions/Curren... ). Why tie up money in new capital expenditures when about a quarter of existing capital is sitting idle?

Ben Bernanke referred in 2005 to a "global savings glut". The conditions which led to that haven't changed much over the past 12 years.

Gross domestic private investment, fixed nonresidential investment increased 2.8% between 2004 and 2014 (I exclude investment in fixed residential structures as that plummeted by 4.9% in that time frame). Computers and software was the sub-field where investment increased the most, by 6.1% a year ( https://www.bls.gov/emp/ep_table_405.htm ).

Whereas from 1994 to 2004, gross private domestic investment increased at a rate of 5.5% a year. Computers and software investment increased at an average rate of 26.5% a year between 1994 and 2004 (ref: same link).

You have to measure investment against GDP and profit rates as well.

In short, Apple is doing what a lot of people with liquid capital are doing, holding onto it.
1 comments
badsock 3357 days ago
Genuine question: given this, am I correct in thinking that if there was a big corporate tax cut the most likely outcome is that the money retained would just further inflate this savings glut?
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valuearb 3357 days ago
Cutting corporate tax rates long term increases the incentive to invest. So the savings turns into capital investment, new jobs and higher productivity and wages.

Cutting one time brings back lots of capital to invest, lots of that will be paid to shareholders, who will spend some and reinvest some. With similar effects, for that year.

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badsock 3357 days ago
That's the standard ideological line, but this whole story is about how Apple is stockpiling cash, not investing.

(And yes, I understand that the cash isn't just stuffed in a mattress, but it's an important distinction that the money isn't being invested in the direct sense)

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