Apple now holding more cash than USA

http://www.bbc.co.uk/news/technology-14340470

by JacobAldridge • 15 years ago

150 126 15 years ago

bbc.co.uk

Supply-side economists, take note.

Unfortunately, they will take note of it as "run the government like a business", which tends to be how supply-side economists would prefer the government to be run anyway.

orijing2• 15 years ago

They want lower revenues for the government. I would hope that it's not the same philosophy for their businesses.

apress9• 15 years ago

Of course, there's actually a much deeper and more important connection. The huge cash hoards of Apple, Google, Microsoft and other big multinational corporations are a direct outgrowth of clever tax strategies they use to shift profits to low-tax countries and avoid US taxes. http://www.reuters.com/article/2011/07/27/us-microsoft-tax-i...

Corporate tax payments as a percentage of total tax revenues are low and historically low compared to the size of the economy. http://www.csmonitor.com/Business/Tax-VOX/2011/0209/Corporat...

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...

kevin_morrill• 15 years ago

It's a bit strange to call it shifting when the profits were made overseas. And it's no surprise they'd keep it off shores once they've made it, since they'd have to give up 35% of it to bring the money inside the U.S.

apress9• 15 years ago

This is not about profits made overseas, say like selling iPhones in China This is the use of complex strategies, like creating a shell company in the Isle of man that "owns" intellectual property and "licenses" it to the US subsidiary for a fee that just happens to equal most of the profits on US sales. The profits go to the tax haven and never come back.

ctdonath• 15 years ago

Note that those big multinational corporations can't move money made outside the country to back home in the USA without incurring an absurd ~30% tax on top of whatever other taxes they paid whoever already. Word is Apple has been pushing for an amnesty so they _can_ bring their money home; until then, that money earned outside the US stays outside the US.

apress9• 15 years ago

Again, this is not because of ordinary sales outside of the US. This is a purposeful effort to reduce the amount owed in US taxes on activity in the US (and other "high" tax countries).

ZachPruckowski• 15 years ago

Last time we had an amnesty, all the money that flooded back in to the USA wasn't reinvested the companies or used to grow the economy, it just want straight into bonuses and dividends.

mmariani• 15 years ago

Not just Apple is lobbying this tax holiday.

More info here http://money.cnn.com/2011/02/16/news/companies/repatriation_...

funthree5• 15 years ago

Maybe it's time they paid their fucking taxes like the rest of us.

apress9• 15 years ago

1. They get credit for all the taxes they paid in other countries. They are essentially supposed to pay the difference between the US rate and the various foreign rates.

2. If you read some of the links, you'll discover that they are minimizing the taxes they pay on US revenue -- sales made right here at your corner Apple store -- by use of clever licensing agreements with their own foreign subsidiaries. Look at the interactive graphic on the Bloomberg story about Google, for example http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho...

ristretto• 15 years ago

Imagine how worse this problem is for European countries, which face the same tax avoidance, and have to sustain massively more expensive public sectors.

fungi• 15 years ago

Europe is a big diverse place... I would imagine you couldn't really generalise to accurately.

Also offset by comparative minuscule military spending and far more efficient health and corporate/public welfare. But [citation needed], just generalisations from an antipodean armchair.

grannyg00se2• 15 years ago

"the country has an operating cash balance of $73.7bn"

How is this so? I thought the annual budget was in deficit. Quite significantly, in fact.

And not to mention the country has a massive debt. Although I understand how that may not affect the operating cash balance.

The headline definitely seems like it could be used as a sound bite for corporate tax increase commentary.

JacobAldridge3• 15 years ago

The difference (in very simplistic terms) is Budget v Cash flow. Think like a business - I might need to borrow funds to cover all my costs this year, but when I make a sale that's still cash coming in.

See the graph here - http://www.slate.com/id/2299845/. "you will also see some spikes in revenue after borrowing is maxed out. This can be attributed to many things - an influx of tax revenue, profits from the Federal Reserve's holdings, and the general movement of funds and debt between accounts."

Also, if the funds you borrow are sitting in an account while you wait to pay future bills, you may have a deficit but a positive cash balance.

(Of course, it's not quite that simple. Borrowings in a business are normally a liability on a balance sheet, though the interest and repayments would affect the budget.)

rauljara• 15 years ago

To use a terrible analogy that doesn't hold up under close scrutiny but is sufficiently accurate to answer your question: Just because you spend more than you earn using your credit card doesn't mean you don't have money in the bank. You can also use your credit card to put cash in your bank account.

The US doesn't hand people treasury bonds to pay them. It uses treasury bonds to put money in its treasury. Then it pays its operating expenses out of the treasury. If the treasure runs down to zero, it can't pay any of its expenses, but it will almost certainly never run down to zero. It gets in new revenues all the time (even without borrowing). Just not enough to meet all of its expenses.

hugh34• 15 years ago

A compulsive gambler, already hundreds of thousands of dollars in debt, goes to a loan shark to borrow another five hundred bucks. He now has an operating cash balance of five hundred dollars, while still having a net worth of minus six figures.

grannyg00se2• 15 years ago

Then I agree that the number is pretty much meaningless. The government can easily increase their operating cash balance simply by incurring more debt. It's the debt, and the deficit that seem most relevant to my untrained mind.

In fact, if you want to compare with a corporation, I'd compare the entity's deficit as a percentage of its revenue.

nhaehnle3• 15 years ago

This number (the $73.7bn) is almost entirely meaningless. If you look at it from first principles, the US federal government does not need to maintain any accounts at all, since it is the entity that controls the monetary system. When they want to spend, they can just credit bank accounts directly; the money doesn't need to come from somewhere.

However, partly to make the payment systems run in a more unified manner, and partly for simple historical reasons, the Treasury does maintain accounts with a balance in them. Since the flows in and out of these accounts are important for maintaining the inter-bank interest rate, any movements there are closely coordinated with the open market operations of the Fed. In the end, the number in those accounts is basically whatever happens to satisfy the current monetary policy best.

To sum it up, the comparison in the article is void of meaning.

For understanding these kinds of things I found the writings of Modern Monetary Theory very interesting. See e.g. here: http://pragcap.com/resources/understanding-modern-monetary-s... There is also an entire chapter in the book "Understanding modern money" by Randall Wray devoted to the accounting contortions that the Fed and Treasury do while running the payment system.

lawlit• 15 years ago

What will happen to the American if the congress does not vote on the rise ?

tomelders5• 15 years ago

No one can say for sure. It's a doomsday scenario that no one is really prepared for.

The only thing anyone can say with any certainty is that the next president of the USA will be a Republican, because that's what this is all about. Destroy the economy, blame the incumbent, and scoop up the next election.

hugh34• 15 years ago

Not really. One thing we can be grateful for is that neither party really wants a default, because neither party is confident that it would be the electoral beneficiary.

It might seem that Republicans would get the benefit, but this fact in itself provides a reason for people to blame Republicans if things go bad, since they'll assume (as you appear to be doing) that they caused the default in order to get the benefit. This makes it pretty much a wash -- if bad things happen, both sides will blame the other and we can't quite see in advance how it'll all play out in the court of public opinion.

brown9-2• 15 years ago

Disagree strongly. If catastrophe happens, voters just may remember who caused it. I'd like to come back to this comment in 16 months.

gnaritas2• 15 years ago

> The only thing anyone can say with any certainty is that the next president of the USA will be a Republican

And they'd be lying.

ridruejo• 15 years ago

Can't wait to see what iBama will look like :)

entangld2• 15 years ago

How do giant stacks of uninvested cash in corporate coffers improve the economy? I wish someone could explain this.

thematt3• 15 years ago

Those "corporate coffers" you refer to are real investments. Apple is not going to settle for getting a 0% return on the cash it holds. It has to put the money somewhere. It's going to invest it in something, whether it be stocks, bonds, or a bank account of some type...all of which benefit the economy in a different way.

Alex3917• 15 years ago

To be fair, just about everyone reading this will probably have more cash than the USA in another week or two.

binbasti• 15 years ago

At this burn rate, it's more like 3 days...

http://www.zerohedge.com/news/treasury-cash-drops-15-billion...

rickdale2• 15 years ago

If you have $1 you are holding more cash than the US.

nivertech• 15 years ago

If you have $1 and don't have a mortgage or other debts

rickdale2• 15 years ago

I said more cash, not more worth or value. Thanks for the downvotes, great to see everyone is using their noggins these days.

nhaehnle3• 15 years ago

A corporation holding cash means they're not investing as much as they could according to supply-side economic thinking.

This should make people reflect on the state of the economy. While it's true that some companies just like to hoard cash (e.g. Microsoft), this may just be the symptom of a bigger problem. With consumers low on cash due to the recession, it simply makes no sense to invest any more. This in turn guarantees that consumers will stay low on cash because a lot of slack remains in the job market.

funthree5• 15 years ago

Apple forbid they'd bring those manufacturing jobs to the US and actually pay some Californians a decent wage and help their own country.

http://harryjerry.com/tech/how-apple-products-are-made-in-fo...

http://www.google.com/publicdata/explore?ds=usunemployment&#...

jodrellblank2• 15 years ago

Aren't companies legally required to act in the vest interests of shareholders?

Overpaying for production out of patriotic racism doesn't seem to fit that mould.

nkassis3• 15 years ago

Here's why I believe the economy in the shitters : http://en.wikipedia.org/wiki/Velocity_of_money

Money needs to move and it's not right now.

nhaehnle3• 15 years ago

I agree. The question is: how do you fix it?

In the case of the big corporations, for example, I see no direct, freedom-compatible way of getting them to spend that money. The only way I see that might work (though here Apple might still be a special case) is to create an environment where businesses see an increase in demand as an incentive for increased investment.

Then the question becomes where that demand should come from, and the most feasible short-term answer (the government) is almost universally ideologically opposed (yes, even Democrats these days seem to shy away from direct spending to stimulate the economy).

tomjen33• 15 years ago

Consumers can't spend money unless they are also producing (where else would they get their money?).

People generally like to consume, so the question is not how do we get them to consume more -- they want to do that already -- but how do we make it possible for them to produce more.

And while credit can be used to start producing (like you use a battery to start a car), it is not, and should not be, used in perpetuity to fund operations -- doing so isn't sustainable.

At the same time we wilify the rich, and those who are the most productive (see examples of how people treat Steve elsewhere in this thread). While there are certainly criminals among the rich (maybe even more than among the general population) this doesn't mean that we should blame all of them (you don't blame all African-Americans, even though they also have a higher crime rate).

As for paying their fair share -- they already do, they pay more tax than most people do and get a lot less from it (how much does Steve get in food stamps?).

jasongullickson• 15 years ago

So...when's the buy-out?

ck2• 15 years ago

Steve Jobs only pays 15% taxes which is probably part of it.

(seriously, this is a fact http://seekingalpha.com/article/183086-steve-jobs-thrives-on... )

Take money from USA consumers, pour it into China manufacturing. They certainly aren't the only ones doing it but add them all up and you'll start to understand the problem.

nkassis3• 15 years ago

Waren Buffet was talking a while back about how it's ridiculous that he pays 17% taxes when his secretary pays over 30%. He's not a big fan of the current capital gain tax.

tomjen33• 15 years ago

And how many millons does he pay more than you?

Stop whining about the wealthy. Steve earned his money, you have no right to them.

tty• 15 years ago

>Steve earned his money, you have no right to them.

Are you implying Steve earned all the money Apple has?

rexreed• 15 years ago

What exactly will Apple do with this cash other than buy billion-dollar patent portfolios? Are there potential big acquisition deals in the works that make sense?

timedoctor• 15 years ago

The government will get the money eventually through increased taxes or through printing more money and deflating the value of the apple "cash" pile. All the Government has to do is to print money and they can take Apple's money without Apple being able to do anything about it!

dangrossman• 15 years ago

Nothing says Apple must keep the money in the form of US dollars in a bank account. If it's sitting in any kind of investment that tracks inflation, printing money won't take the money. If they choose to keep it in other currencies, printing money won't take the money.

angelortega2• 15 years ago

It's time to nationalize Apple, sell its assets and use the money to take off of the crisis.

Wentz2• 15 years ago

Sarcasm?

angelortega2• 15 years ago

Just kidding, but some people aren't just able to accept a joke about Apple.

All this does not make my initial comment less true, though.

Apple now holding more cash than USA

Related Stories