IF THE private sector continues to save hard even as governments try to borrow less, the risks of a double-dip recession rise. A long period of high household saving seems assured in rich countries whose consumers lived off credit and have heavy debt burdens to show for it. But much of the recent increase in private-sector savings comes not from consumers but from businesses. Profits have been more than enough to cover corporate spending in many parts of the rich world, leaving an excess of funds for firms to squirrel away. A lot depends on whether this continues.
If cautious firms pile up more savings, the prospects for recovery are poor. Economies will be stuck in the current—and odd—configuration where corporate surpluses fund government deficits. If firms loosen their purse-strings to hire workers and to invest, that will allow governments to scale back their borrowing.
To read the full, original article click on this link: Companies' cash piles: Show us the money | The Economist
Author: The Economist
