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Where Will Growth Come From?

Looking at the GDP numbers last week, I wondered about possible sources of sustained GDP growth, given that so much of what drove the 3.5% third-quarter figure were one-off boosts like cash-for-clunkers. Well, today's Wall Street Journal has the beginning of an answer: Corporate cash stockpiles. Here's the Journal:

In the second quarter, the 500 largest nonfinancial U.S. firms, by total assets, held about $994 billion in cash and short-term investments, or 9.8% of their assets, according a Wall Street Journal analysis of corporate filings. That is up from $846 billion, or 7.9% of assets, a year earlier. ...

"Everyone is hoarding cash," says Carsten Stendevad, head of Citigroup Inc.'s financial-strategy group. He and others call that a hangover from the financial crisis a year ago, when companies couldn't raise money or had to pay much higher rates than usual. ...

Large cash balances are "great news for the macroeconomy," says Mr. Stendevad. "A lot of firms now are in a start reinvesting again, and that ultimately is what is gong to drive employment." ...

Today investors are rewarding companies with big cash hoards, says Citigroup's Mr. Stendevad. But some firms have more than they need, he says, and investors are starting to pressure executives to reinvest the money or return it to shareholders through stock repurchases or dividends.
"During the crisis, no amount of cash was sufficient," he says. "Now it's about growth again."