Why Are U.S. Businesses Still Hoarding $1.5 Trillion in Cash?

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Alamy For years -- ever since the Great Recession ended -- pundits have been pontificating about a strange trend in corporate America. Despite earning record profits, and having the ability to borrow cash easily, companies were refusing to spend. Like Scrooge in his office, they were raking in profits ... and then sitting on them, refusing to put the money to work to grow the American economy. Or so the story went. But was it true? it true? It turns out that this real story is a bit more complicated; and you'll be surprised where a lot of that cash came from ... and what it needs to be spent on. A Kernel of Truth Every complex tale grows from a kernel of truth, of course, and this one actually grows out of two such kernels. It's true that American corporations are fabulously profitable today. According to the Department of Commerce, profit margins at U.S. companies in 2013 were regularly hitting levels of 9.3 percentage points -- more than 57 percent higher than average over the past 60 years. Also true is that these profits, in turn, yielded a lot of cash for the corporations earning them. From 2006 through mid-2013, total cash reserves at U.S. nonfinancial companies (i.e., everything but banks) nearly doubled, rising from $820 billion to $1.48 trillion, an 81 percent increase. Credit ratings company Moody's (MCO) recently estimated that cash levels at the end of 2013 probably hit $1.5 trillion.