Why "Corporations Have $1.3 Billion in Cash" is a Worthless Talking Point

Via Ritholtz, Marketwatch:

9. We are levering up like crazy. Looking for a “credit bubble”? We’re in it. Everyone knows about the skyrocketing federal debt, and the risk that Congress won’t raise the debt ceiling next month. But that’s just part of the story. U.S. corporations borrowed $513 billion in the first quarter. They’re borrowing at twice the rate that they were last fall, when corporate debt was already soaring. Savers, desperate for income, will buy almost any bonds at all. No wonder the yields on high-yield bonds have collapsed. So much for all that talk about “cash on the balance sheets.” U.S. nonfinancial corporations overall are now deeply in debt, to the tune of $7.3 trillion. That’s a record level, and up 24% in the past five years. And when you throw in household debts, government debt and the debts of the financial sector, the debt level reaches at least as high as $50 trillion. More leverage means more risk. It’s Econ 101.

My claim was that corporations were sitting on that cash to be able to pay off debt coming due if we had another meltdown.  They learned painfully what can happen if they aren't able to roll debt over with a new bond issue.  I think that remains true.  They continue to borrow to finance investment, but they have to hold that cash for emergencies.  They won't be spending it anytime soon.