Debt can be a good thing. It gets the wheels of the economy moving.
Too much debt, however, can be a bit of a problem to say the least (see: the financial crisis).
Well, American companies may just have a mountain’s worth of problems, according to a new report from Andrew Chang and David Tesher of S&P Global Ratings.
‘At the same time, the imbalance between cash and debt outstanding we reported on last year has gotten even worse: Debt outstanding increased 50x that of cash in 2015,’ wrote Chang and Tesher.
‘Total debt rose by roughly $850 billion to $6.6 trillion last year, dwarfing the 1% cash growth ($17 billion).’
To be fair, Chang and Tesher do mention that the $1.84 trillion in cash that the over 2,000 companies they analyzed are holding is the largest amount ever. The issue is, a big pile of cash doesn’t help, as the analysts put it, ‘mask’ the much, much larger mountain of debt.
This post was published at David Stockmans Contra Corner on May 24, 2016.
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