News & Opinion | June 8, 2019 5:14 am

World’s Richest Companies Literally Don’t Know What to Do With Their Money

More money, more problems

The world's wealthiest are hoarding record levels of unused cash.
Getty Images

The world’s wealthiest are suffering from the ultimate one-percent problem: they just have too much money. 

According to Axios, while growing income inequality continues to fuel social unrest, a small percentage of the world’s top earning individuals and companies are sitting on unprecedented levels of unused wealth.

While U.S. companies pulled in a record $2.3 trillion in corporate profits last year, they are largely choosing not to reinvest much of it. According to the International Monetary Fund, top companies around the world are hoarding their earnings in cash and buying back stock, rather than reinvesting it back into their businesses.

Companies made a record $1.1 trillion in stock buybacks last year, but they also have record cash holdings totaling close to $3 trillion. Meanwhile, increased cash flow has left private equity firms with $2 trillion of unused capital, and the top one percent of U.S. households are holding $303.9 billion in cash — a record number that marks a staggering jump from the $15 billion they held before the financial crisis.

According to Axios, this economic quandary has its roots in a variety of factors, including the federal quantitative easing program that slashed money-borrowing costs, making it easy for companies to splurge on debt for mergers and acquisitions and to boost revenue, while globalization helped cut labor costs. These issues were compounded by The Tax Cut and Jobs Act — aka the Trump tax cut — which slashed the share of U.S. taxes that companies paid to record lows and provided those companies even more capital for buybacks, dividends and executive compensation.

These overlapping factors have left money that would previously have been divided among businesses, workers and the government to benefit schools, healthcare and infrastructure sitting untouched in corporate accounts.

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