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Remember that record pile of cash that U.S. companies have amassed over the past year? It’s finally being put to use:

For months, companies have been sitting on the sidelines with record piles of cash, too nervous to spend. Now they’re starting to deploy some of that money — not on hiring workers or building factories, but to prop up their share prices.

Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year, according to Birinyi Associates.

….Some companies are buying back shares partly because they don’t want to invest in developing new products or services while consumer demand remains weak, analysts said. “They don’t know what they want to do with all the cash they’re sitting on,” said Zachary Karabell, president of RiverTwice Research.

I’ve always hated companies that do share buybacks. I know all the arguments in favor of it, but as far as I’m concerned it’s nothing more than a desperate effort to curry favor with shareholders and meet short-term bonus targets, carried out by a management team that has no idea how to grow their business. And if they don’t know how to grow their business, they should just announce that they’ve decided to adopt the corporate model of a regulated utility and start paying out regular, steadily growing dividends.

End of rant. Aside from all that, though, this particular news tells us once again that the most likely cause of slow economic growth right now isn’t structural, it’s cyclical. People aren’t buying stuff, and because of that businesses aren’t investing in growth. Increase demand, and they’ll start up again.

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

payment methods

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