Linked by Thom Holwerda on Mon 1st May 2017 10:56 UTC
Apple

Apple Inc. is expected to report Tuesday that its stockpile of cash has topped a quarter of a trillion dollars [actual source is the WSJ, but it's paywalled there], an unrivaled corporate hoard that is greater than the market value of both Wal-Mart Stores Inc. and Procter & Gamble Co. and exceeds the combined foreign-currency reserves held by the U.K. and Canada combined.

The goal of a capitalist, free market-based society is that as companies get more successful, they invest their winnings back into the company, increasing productivity, hiring more people, and thus improving the overall state of the economy. While inherently flawed, this system has brought us a lot of good, and has lifted quite a number of people out of abject poverty.

However, one has to ask what individuals and corporations hoarding this much money as Apple is doing are contributing to society. Apple's 250 billion dollars are locked away, and aren't used for anything. Every day, Apple is extracting vast sums of wealth from society - as they should in a capitalist society - but they are no longer investing it back into society. And Apple isn't alone in this, of course - a rich few are extracting immense amounts of wealth from society without giving back.

This breaks the traditional capitalist model.

Things like increased automation and robotisation are only going to accelerate this process. At some point, we're going to have to stop and ask ourselves if this is tenable, and if not, what we are going to do about it. It goes against the core 'values' of die-hard capitalists, but we might reach a point where we have to forcibly - through law - take it from companies like Apple.

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Not true
by Kondor337 on Mon 1st May 2017 11:20 UTC
Kondor337
Member since:
2006-09-16

It is certainly debatable whether it is a good thing if a single company owns 250 billion in cash and short term investments, but your conclusion that "Apple is extracting vast sums of wealth from society" is totally wrong. An economy does not work like that. Apple does not really have 250 billion dollars in 100-dollar notes put in some kind of money bin.

When Apple says they have "cash", they are talking about something that is more like the money you have in your cheque account, i.e. the funds are liquid.

Of course, no one would argue that when people have large sums of money in their bank account, they were "extracting wealth from society".

Reply Score: 2

RE: Not true
by M.Onty on Mon 1st May 2017 11:25 UTC in reply to "Not true"
M.Onty Member since:
2009-10-23

Of course, no one would argue that when people have large sums of money in their bank account, they were "extracting wealth from society".


That's exactly what is often argued. I'm not an economist, so could be wrong, but my understanding is that reserves are not classically seen as being a productive part of the economy.

Reply Score: 2

RE[2]: Not true
by kittynipples on Mon 1st May 2017 12:17 UTC in reply to "RE: Not true"
kittynipples Member since:
2006-08-02

Reserves are the "cash" that banks are typically not allowed to lend out to prevent them from becoming illiquid; i.e. they are kept in reserve.

Most of the balance you have in your bank account goes right back out the door to borrowers.

Edited 2017-05-01 12:20 UTC

Reply Score: 4

RE[3]: Not true
by Kondor337 on Mon 1st May 2017 14:27 UTC in reply to "RE[2]: Not true"
Kondor337 Member since:
2006-09-16

No, this is totally wrong.

Please, do not vote down comments when you don't know (at all) what you're talking about.

Apple's entire cash reserve *IS* invested "back into society". Apple's cash "reserves" have nothing to do with the "reserve" of a bank.

If you want to learn something about money in our modern economy, you can start here:

http://www.bankofengland.co.uk/publications/Documents/quarterlybull...

Reply Score: 3

RE: Not true
by kwan_e on Mon 1st May 2017 11:40 UTC in reply to "Not true"
kwan_e Member since:
2007-02-18

An economy does not work like that. Apple does not really have 250 billion dollars in 100-dollar notes put in some kind of money bin.


The money did not come from nowhere. People paid into this pile with actual money they had. The point you're missing is not whether there's actual physical money, but that it is not fake money like stock options. It is money that people literally worked and got paid for, producing value for the economy, only for that value to be locked away because they gave it to Apple.

Reply Score: 7

RE[2]: Not true
by Kondor337 on Mon 1st May 2017 14:32 UTC in reply to "RE: Not true"
Kondor337 Member since:
2006-09-16

My comment has been voted down, your comment has been voted up. That only proves that the general population (and even the very smart people who read OSNews) know almost nothing about our economy and how it works.

I'm not missing any point. You erroneously think that the money we give to Apple (or at least the large part of it which they can keep because of their ridiculously high profit margins) is somehow "locked away". It isn't. That's why I said there was no "money bin". Please inform yourself about how our economy works. You can start with the document from the Bank of England I linked to above.

Reply Score: 3

v RE[3]: Not true
by kittynipples on Mon 1st May 2017 16:27 UTC in reply to "RE[2]: Not true"
RE[3]: Not true
by kwan_e on Mon 1st May 2017 17:05 UTC in reply to "RE[2]: Not true"
kwan_e Member since:
2007-02-18

You can start with the document from the Bank of England I linked to above.


Yeah, because we want a large, unaccountable, bank oligarchy to control the economy.

That money is better off being spent on everyday expenses and circulating in local communities.

Surely having so much money in the hands of a few banks is the central planning that so-called conservatives fear. You know, unless it benefits them. Then it's okay.

Reply Score: 1

RE: Not true
by jonsmirl on Mon 1st May 2017 12:09 UTC in reply to "Not true"
jonsmirl Member since:
2005-07-06

Most of the cash pile is invested in US Treasuries. So it is doing something; financing the US deficit.

Money is always doing something, you can't stop it from working for somebody. Even cash in a mattress is working. It is again financing the government. The only way to stop it is to buy something like precious metals.

The argument being made here is -- who gets to choose what that money is doing. Right now Apple is choosing low yield treasuries. Those treasuries pay interest which helps drive the stock price up so you are getting a yield too.

------

How much inequality has Apple created? I've been in the line buying groceries a dozen times now when the person in front of me paid with a Food Stamps card while talking on their iPhone. A poor person owning an expensive $600 iPhone is a powerful contribution to inequality.

Edited 2017-05-01 12:15 UTC

Reply Score: 4

RE[2]: Not true
by grat on Mon 1st May 2017 13:28 UTC in reply to "RE: Not true"
grat Member since:
2006-02-02

Got a source for that claim? Not that they have bonds, but that the majority of the $250 billion is in bonds.

Personally, if they want to support the US government, they could always, you know, pay taxes.

Reply Score: 4

RE[3]: Not true
by jonsmirl on Mon 1st May 2017 13:50 UTC in reply to "RE[2]: Not true"
jonsmirl Member since:
2005-07-06

It is not in bonds, it is in treasury notes. The 'Money market' funds you read about are in treasury notes. Notes have a lifetime of about three months compared to bonds which have 10-30 years. Treasury notes are how you park money and have it still earn interest. All large companies do this.

Reply Score: 2

RE[4]: Not true
by Trenien on Mon 1st May 2017 22:01 UTC in reply to "RE[3]: Not true"
Trenien Member since:
2007-10-11

In other words, they're using the hoard to take even more money from society under the guise of 'interests'.

Note that it doesn't have to be that way. With a raise in taxes on profits, that same money (or at least part of it) would still go back to the community, but with no interests attached this time.

Reply Score: 1

RE[3]: Not true
by Alfman on Mon 1st May 2017 13:54 UTC in reply to "RE[2]: Not true"
Alfman Member since:
2011-01-28

grat,

Personally, if they want to support the US government, they could always, you know, pay taxes.


Ain't that the truth, a large portion of those profits came from corporate tax avoidance. Some people might praise this setup "yeah give it to the man", but they don't really seem to think it through. Our own personal shares of taxes must go up and/or go less far in order to compensate the amount that apple and other companies aren't paying. These corporate entitlements aren't inconsequential, the country is going into debt so that these companies don't have to pay their taxes. This would be easy enough to fix if government weren't so corrupt. The trump administration is planning to lower corporate taxes even more, which regardless of the rhetoric, will obviously transfer even more wealth to upper classes. They'll have to work less and less hard for their growing share of the wealth.

Reply Score: 3

RE[2]: Not true
by cpuobsessed on Mon 1st May 2017 13:41 UTC in reply to "RE: Not true"
cpuobsessed Member since:
2009-06-09

You're off topic with that remark. You don't know what happened to that person or how they got their phone.

Reply Score: 1

RE[3]: Not true
by jonsmirl on Mon 1st May 2017 13:59 UTC in reply to "RE[2]: Not true"
jonsmirl Member since:
2005-07-06

Verizon/AT&T are also very guilty of this. For a long time in America iPhones were 'free' or maybe $99. That's because the cell companies built the payments into your cell bill and there was no way to get out of them. It did not matter if you picked a $100 phone or a $600 phone, your bill was the same. Apple was the main force behind this -- they used contracts to force the iPhone to appear to be the same price as low end phones.

Last year the FCC has made them change this. Now phones comes with unbundled financing and you can BYOD.

This is not the poor person fault, because of the Apple contracts Verizon/AT&T had arranged billing such that you were a fool if you didn't pick a flagship phone. There was zero incentive to pick cheaper models. This manipulation by Apple/Samsung plus Verizon/AT&T resulted in the extraction of billions of dollars of profit from everyone with a cell phone.

Edited 2017-05-01 13:59 UTC

Reply Score: 3

RE[2]: Not true
by Flatland_Spider on Mon 1st May 2017 16:38 UTC in reply to "RE: Not true"
Flatland_Spider Member since:
2006-09-01

That iPhone is probably the easiest and best method they have of accessing the Internet.

Reply Score: 1

RE: Not true
by smart_guy28 on Tue 2nd May 2017 14:47 UTC in reply to "Not true"
smart_guy28 Member since:
2017-05-02

Kondor337 is absolutely correct. If it's cash (in a bank), which I'm sure only a fraction of it is, then it's treated like cash of any kind. It's lent out to people and businesses who want it.

Saying it's "out of the economy" is not only factually wrong, it impossible.

Even if it was is in cash, stuffed in a mattress never to be seen again, it would proportionally raise the value of the other cash in the economy (deflation) and basically would be free money to others.

You guys should really learn a bit more about money, this is a widely misunderstood topic.

Reply Score: 2

Comment by M.Onty
by M.Onty on Mon 1st May 2017 11:23 UTC
M.Onty
Member since:
2009-10-23

Its an absurd amount.

Either; they've got a serious case of corporate neurosis about previous cash crises, and just cannot stop saving for fear of not riding out the next. That amount just doesn't make rational sense any more, even as security.

Or; they intend on launching some fantastically expensive new project at some point in the next decade. Moonshot expensive.

If its the first then Thom's right, Apple becomes a dysfunctional part of the system. If its the latter, that that's all terribly exciting and all, but for how long is it acceptable to put up with an open sink hole like that in the economy?

Reply Score: 2

404 and Communists
by M.Onty on Mon 1st May 2017 11:32 UTC
M.Onty
Member since:
2009-10-23

Slightly off topic. But the Morning Star home page is a 404. I've never seen that before on a reputable news site!

Also its entertaining for a British reader to find an investment, bonds and shares advice website that shares a name with the Communist Party of Great Britain's tabloid of the same name.

Reply Score: 2

monopoly profits and tax avoidance
by puenktchen on Mon 1st May 2017 11:54 UTC
puenktchen
Member since:
2007-07-27

In the happy capitalist utopia which is painted in economy text books this hoarding of capital can't happen. In reality it does because thanks to generous protection of intellectual property Apple does sack in monopoly profits from its customers. I know, I'm one of them since decades. On the other side it can dictate prices to its suppliers because of its sheer size. Again, not a free market working as perfect as in the text book. And in the end it doesn't pay its share of the costs to organise those markets to society because of ingenious tax avoidance schemes.

All of those problems could easily rectified if our governments would do their fucking job.

Reply Score: 6

Comment by sj87
by sj87 on Mon 1st May 2017 12:00 UTC
sj87
Member since:
2007-12-16

Once before I read that Apple makes so much money it doesn't even know how to invest it... Then I read that Apple is constantly trying to kill the business of refurbished iPhones and iPads and Macs... This is not just by making their stuff intentionally unfixable as much as possible, but also by lobbying for new laws and regulation.

At least Apple knows just where it will never ever want to invest, that is its customers.

Reply Score: 7

RE: Comment by sj87
by cjcox on Tue 2nd May 2017 16:44 UTC in reply to "Comment by sj87"
cjcox Member since:
2006-12-21

At least Apple knows just where it will never ever want to invest, that is its customers.


We just want new Apple phones and gadgets.
- Apple Customers

Reply Score: 1

Comment by kittynipples
by kittynipples on Mon 1st May 2017 12:23 UTC
kittynipples
Member since:
2006-08-02

...but we might reach a point where we have to forcibly - through law - take it from companies like Apple.


Yes, expropriation has so much more legitimacy when you clothe yourself in law before sending in the thugs with guns.

Reply Score: 3

Yes this is wrong
by joshv on Mon 1st May 2017 12:27 UTC
joshv
Member since:
2006-03-18

That money should be paid out to the shareholders.

Reply Score: 4

Comment by Licaon_Kter
by Licaon_Kter on Mon 1st May 2017 13:00 UTC
Licaon_Kter
Member since:
2010-03-19

Cash money is so good, until you actually need to eat them...

Reply Score: 1

Apple needs that money to buy ...
by DeepThought on Mon 1st May 2017 13:50 UTC
DeepThought
Member since:
2010-07-17

a German car manufacturer for the Apple-Car:
BWM (an Apple company) :-)

Reply Score: 1

Money that is not moving has no value
by feamatar on Mon 1st May 2017 14:12 UTC
feamatar
Member since:
2014-02-25

I would suggest everyone to stake a step backward. I know it is very fancy to hate corporations, but the thing is, life is not easy, or better to say simple, for those big corporations.


Here are some details, why the story is not that simple:
http://www.marketwatch.com/story/apple-isnt-really-sitting-on-216-b...

I am sure there are many people over here who are smarter than the shareholders of the company, but let's give some doubt that there must be a reason they are satisfied with the current situation.

Reply Score: 4

JLF65 Member since:
2005-07-06

That story makes Apple look even worse! Not only are they sitting on hundreds of billions, they're keeping over 90% outside the US DELIBERATELY to avoid paying taxes! Even worse than that, they're going more into debt in the US to send even more of that money out of the US to avoid more taxes! This is FAR worse than just sitting on piles of cash.

Reply Score: 2

krreagan Member since:
2008-04-08

Read it again!!! the money outside the US has always been outside the US! It's profits on sales from outside the US. None of it is from the sales from items inside the US.

Reply Score: 3

This is one reason...
by aca1999 on Mon 1st May 2017 14:45 UTC
aca1999
Member since:
2017-04-21

... I don't buy Apple products, but I recongnize that they are of good quality. If you like this corporation behaviour or don't worry, buy them, if not...

Reply Score: 1

RE: This is one reason...
by krreagan on Mon 1st May 2017 20:38 UTC in reply to "This is one reason..."
krreagan Member since:
2008-04-08

... So you buy from Alphabet? I guess you bought the "Don't be evil" line hook-line-and-sinker!

Reply Score: 2

it's all about tax
by kristoph on Mon 1st May 2017 17:54 UTC
kristoph
Member since:
2006-01-01

Apple has money in offshore accounts where the revenue was generated in accordance with tax laws in those jurisdictions ( you may argue under questionable tax agreements, with the likes of Ireland for example ).

Apple does not have the means to spend that money in those jurisdictions so all it does is invest it, hence increasing it's cash hoard.

In order to bring the money into the US it would have to pay a bunch of tax which it doesn't want to do while US politicians are working on a tax repatriation deal.

I expect once Apple et al can bring the money into the US under favorable terms they will likely do something with it: either buy something major or just return the money to investors.

Reply Score: 3

RE: it's all about tax
by Alfman on Mon 1st May 2017 21:16 UTC in reply to "it's all about tax"
Alfman Member since:
2011-01-28

kristoph,

In order to bring the money into the US it would have to pay a bunch of tax which it doesn't want to do while US politicians are working on a tax repatriation deal.

I expect once Apple et al can bring the money into the US under favorable terms they will likely do something with it: either buy something major or just return the money to investors.


Nobody should be made to struggle like that. How can we claim to support the right to life, liberty, and the pursuit of happiness when we don't even let companies repatriate hundreds of billions of untaxed dollars without favorable business terms? Just think of the message it sends if we punish successful billionaire corporations by making them pay taxes just like smaller companies... nobody in their right mind would want to be a billionaire! What's the incentive when you get there only to find you have to pay taxes like any other schmuck? It's a rotten deal if you ask me.

Reducing and even eliminating taxes for billionaires will increase the incentives for millions of people in poverty to work harder, and then america will be great again.

/sarcasm

On a less sarcastic note, you're right that's clearly what these multinational companies want. But it seems incredibly unfair and unjust to reward the tax evaders at the expense of other taxpayers (both companies and individuals) who paid their full share.

Edited 2017-05-01 21:26 UTC

Reply Score: 2

RE[2]: it's all about tax
by kristoph on Mon 1st May 2017 22:02 UTC in reply to "RE: it's all about tax"
kristoph Member since:
2006-01-01

The dollars are not 'untaxed'. That's really the whole point. The money has been taxed in one jurisdiction and so many companies - including Apple - don't want it to be taxed yet again in the US at the 35% rate.

Reply Score: 2

RE[3]: it's all about tax
by Alfman on Mon 1st May 2017 22:34 UTC in reply to "RE[2]: it's all about tax"
Alfman Member since:
2011-01-28

kristoph,


The dollars are not 'untaxed'. That's really the whole point. The money has been taxed in one jurisdiction and so many companies - including Apple - don't want it to be taxed yet again in the US at the 35% rate.


It is "untaxed" with respect to the IRS, that's the whole reason companies are keeping the money overseas - to avoid taxation. It's not just the US taxes they're avoiding either, they avoid taxes around the world by funneling money to wholly owned subsidiaries that have no products or staff but are designed solely to avoid taxes.

https://www.bloomberg.com/news/articles/2013-05-22/google-joins-appl...

I knew we discussed this on osnews before:
http://www.osnews.com/story/29374/EU_Ireland_gave_illegal_tax_benef...

Edited 2017-05-01 22:38 UTC

Reply Score: 2

RE[3]: it's all about tax
by judgen on Tue 2nd May 2017 10:35 UTC in reply to "RE[2]: it's all about tax"
judgen Member since:
2006-07-12

Not to be cynical but there is also the inflation tax that the US uses: 2362.6% is the cumulative inflation since 1913 (when the federal reserve was instituted to fight inflation and market downspirals)

Edited 2017-05-02 10:35 UTC

Reply Score: 2

RE[4]: it's all about tax
by Alfman on Tue 2nd May 2017 14:06 UTC in reply to "RE[3]: it's all about tax"
Alfman Member since:
2011-01-28

judgen,

Not to be cynical but there is also the inflation tax that the US uses: 2362.6% is the cumulative inflation since 1913 (when the federal reserve was instituted to fight inflation and market downspirals)



Doesn't help that they took us off the gold standard in 1933 either, that was an effective control against inflation.



In many ways I wish we'd rethink macroeconomic banking. The banks get to create money out of thin air to loan it to consumers. They're supposed to pay interest for the privilege of "printing" money, but after multiple bailouts and years of low and even zero percent interests for the banks, it's very clear we've been subsidizing the banks even as they rewarded CEOs with millions of dollars in bonuses.

To the extent that everyone wants to argue these private companies are "too big to fail", why doesn't any politician do anything about it? (Yeah, it's a rhetorical question, taking on big money is political suicide.)

Reply Score: 2

Learn From History. This is not unique.
by bryanv on Mon 1st May 2017 19:14 UTC
bryanv
Member since:
2005-08-26

In the robber-barron days of early capitalism, it was not uncommon for _individuals_ who had amassed a massive war-chest to use that stockpile to provide liquidity to others in a huge contraction. Some economists believe JP Morgan singlehandedly saved markets from utter collapse and essentially functioned as a lender of last resort akin to a central bank in volatile markets.

My point being, that large war chests are not counter to capitalist intention, and are not unethical or immoral. Money, afterall, is amoral.

Also recall, that in this day and age, money is a physical representation of someone else's debt. If anything we should _thank_ apple for taking inflated dollars out of consumer circulation, effectively reducing the amount of liquidity in the market and thereby reducing overall inflation.

Were there to be an economic crash, they're in a position to invest whatever value their positions (devalued cash or other assets) into propping up sectors of the economy that have been troubled over the last few years. I wouldn't call that irresponsible or unethical.

If anything, it's highly responsible. This is a company that's been banking their boom, saving for a rainy day.

All indicators predict that at least for Apple, bloom may be off the boom, and the rainy days may be right around the corner. They're in much better shape this time, than they were in the 1990's, and they know from that experience that booms don't last forever.

So hold off on the socialist propaganda Thom. They're not screwing their investors, and they're not donking the economy. If anything, they're acting as a buffer right now. Where they to dump all $250b into the economy at once, _that_ would be unethical.

Reply Score: 3

Alfman Member since:
2011-01-28

bryanv,

Also recall, that in this day and age, money is a physical representation of someone else's debt. If anything we should _thank_ apple for taking inflated dollars out of consumer circulation, effectively reducing the amount of liquidity in the market and thereby reducing overall inflation.


On the other hand, apple is also causing inflation with high product prices and getting consumers to pay for it through debt (credit cards/phone contracts).


So hold off on the socialist propaganda Thom. They're not screwing their investors, and they're not donking the economy. If anything, they're acting as a buffer right now. Where they to dump all $250b into the economy at once, _that_ would be unethical.


Not at all.

If these MNCs paid taxes like everyone else, government programs like social security wouldn't be be in such dire financial shape, we could pay for infrastructure projects we desperately need (both for jobs and because our roads is in disrepair).

They could use the money to create more jobs. Or if apple were feeling more philanthropic they could use it on community parks, museums, education. Heck they could even give every adult in the US $1000, which would help stimulate the economy. There are a lot of places it could go.

Apple has a unique problem: they have more money than they need and no motivation to spend it.

Edited 2017-05-01 22:08 UTC

Reply Score: 2

Soulbender Member since:
2005-08-18

In the robber-barron days of early capitalism, it was not uncommon for _individuals_ who had amassed a massive war-chest to use that stockpile to provide liquidity to others in a huge contraction.


This was especially handy when the robber-barons where the ones causing the contractions.

Edited 2017-05-02 06:58 UTC

Reply Score: 3

Comment by judgen
by judgen on Tue 2nd May 2017 10:28 UTC
judgen
Member since:
2006-07-12

The NHS is still by far a larger company than apple. (mentioning it for perspective)

Apple is valued at 495 billion. NHS gets 193 billion dollars (did the exchange for you) of taxpayer money EVERY year!

Reply Score: 2

What?
by fdhawn on Fri 5th May 2017 20:03 UTC
fdhawn
Member since:
2017-05-05

Apple's cash is all lent out as part of the capital markets. I take the point that it should do more direct investing.

The tax situation with Apple and many other US companies is because the US taxes the overseas income of US citizens and companies. You get to deduct foreign tax payments. But it requires a lot of mental gymnastics to justify the US tax system.

Reply Score: 1