A Curate\’s Egg of a column

Wouldn\’t get away with this in the Old Green Tree Mr. Wheatcroft:

The real charge against Cameron isn\’t Eton or Bullingdon but Carlton. Where someone of his background might once have spent his early manhood serving with the Coldstream, he spent his as a shifty PR man for a second-rate television company.

That\’s spot on of course.

But this is rubbish:

A large part of the reason why growth remains so low and unemployment too high is the sheer hoarding of cash by British as well as American companies. In 2011 British companies had an astonishing — and outrageous — cash-flow surplus of 6 pc of GDP, with historically high profit margins. This money should have been used for productive investment, but wasn\’t.

In his recent book The New Few, Ferdinand Mount, a former adviser to Margaret Thatcher, expresses the revulsion so many of us feel at the way that the very rich have became so much richer over the past two decades. What Saft shows is that these new few have actually enriched themselves \”by deferring long-term good\”, hugely increasing their own \”compensation\” to the detriment of employees, investors, and the nation as a whole.

No, the two things cannot both be true. If companies are hoarding cash then they\’re not paying it out in compensation, are they?

 

 

16 thoughts on “A Curate\’s Egg of a column”

  1. ….In 2011 British companies had an astonishing — and outrageous — cash-flow surplus ……

    Note the word outrageous…..

    The banking system is creaking, the world is full of risks, and prudent maintenance of cash reserves by nervous companies is outrageous.

    ….. This money should have been used for productive investment, but wasn’t…….

    Perhaps the management of said companies, who in aggregate know a hell of a lot more about their businesses than a whole gaggle of columnists could, cannot see any productive investment opportunities.

  2. And just why are companies wrong to hoard cash whilst banks are right to do so, as insisted by socialist politicos in Europe? The complaint of the left is that banks don’t lend enough (their balance sheets shredded by lending on dodgy schemes), OTOH they want ‘ordinary’ companies, in a time of Labour assisted financial chaos, to be imprudent with their shareholders funds. All part of the leftie meme that they know best how to spend other peoples money.

  3. Not only hoarding the cash, sometimes it is worse.

    A complaint by supermarkets in Spain recently:

    ‘It takes us a year to get all the permits to open a petrol station.’

    And they want to open hundreds and they have the cash to do so. Talk about a short-term boost to the building industry.

    Here we have an example of investment opportunities not being taken up at appropriate times, and on top of everything they sell us the petrol cheaper,

    Maybe it is the oil majors lobbying, I don’t know. But something is holding up investment (perverting the market) and only the politicos can make it easier.

  4. “The real charge against Cameron isn’t Eton or Bullingdon but Carlton. Where someone of his background might once have spent his early manhood serving with the Coldstream, he spent his as a shifty PR man for a second-rate television company.”

    You mean he was in trade? How ghastly. Thank goodness then for Ed Milliband, whose hands have never been sullied by any form of commercial activity.

  5. It’s the standard conceptual problem which is enormously common; the failure to see the economy as a cycle. Humans seem to have some kind of constant urge to see things in a linear fashion. So people see money arriving at some defined point- “profits” or “savings” or the like, and then just sort of stopping up there like dammed water. It’s particularly exacerbated by a mental image of seeing savings as money in a vault, like a pile of gold coins, whereas we all know that money “in the bank” isn’t in the bank at all; all that’s in the bank is a debt from the banker to the account holder.

    There’s also of course all the usual Keynesian aggregate statistics fallacies going on here; aggregate spending, aggregate investment. Doesn’t matter what you “spend” on or “invest” in, so long as you’re spending or investing in something, anything. There’s a particular fetish for railways, I’ve observed. Everyone’s always talking about kick-starting the economy by building a railway, despite the fact that so far as we can tell, they never run at a free market profit. It’s like the Railway Mania never ended, at least among people who write newspaper columns.

  6. [email protected]

    Couldn’t be. The amounts are too piddling when you think about it.

    But the independent petrol station owner’s association? Whatever, maybe nobody and it is just total bureaucratic incompetence on the part of politicos who expressely desired they want to kickstart the economy and create jobs. Ha!

    Actually, that makes more sense.

    Still we have come some way. There is now a web site telling you where petrol is cheapest in each province and 30 years ago you stopped and filled whenever you found a petrol station on a long trip, irrespective of the level of fuel in your tank.

  7. It’ll be the independent petrol station owners, who in most cases are the flag flyers for the major brands. In most markets, regulations are designed to protect them.

  8. No, it’ll be the normal lefty nimbys. The same sort of people who in my neighbourhood in Milan complain that there are not enough parking spaces AND that no new parking spaces should be built

  9. but in Spain, surely Repsol has a major voice…don’t they want more petrol stations? As it is , they seem to have garages in the most over-crowded parts of every town and village – are they catering for a family-style station offering?

  10. It’ll be the independent petrol station owners, who in most cases are the flag flyers for the major brands.

    Just for info., there are 4 models of petrol station:

    1. Oil company owned, oil company operated
    2. Oil company owned, independently operated (franchise, effectively)
    3. Independently owned, supplied with oil company fuel which they still own, and the operator takes a cut.
    4. Independently owned, and the operator buys the fuel and owns it.

    At least that’s how it works in Total. Not sure about the other majors, but I suspect it is similar.

  11. Ian B

    It’s because of all the environmentally-friendly green types who think moving large amounts of people around by train is friendlier to the environment than moving large amounts of people around by car. And all governments at the moment seem to be trying to win over the green lobby. But the lack of logic here is extraordinary. Surely by far the environmentally-friendliest approach is to discourage large amounts of people from moving around at all.

  12. Everyone’s always talking about kick-starting the economy by building a railway, despite the fact that so far as we can tell, they never run at a free market profit.

    I for one lament the lack of free market profitability of roads. Maybe there’s some kind of… ah (and yes, I know to his great credit Tim is indeed in favour of road pricing).

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