Are you sure it's really a bad thing for a company to keep cash on hand? The airlines this year were bailed out because they chose not to keep cash on hand, and then they suddenly lost most of their revenue. So maybe it's actually a good thing for companies to keep some savings available, so inefficient bailouts aren't necessary.
No it isn't a bad thing to set aside cash for future risk. I'm saying that a limit could be established on how much is too much. And then tax just the too much part.
> That amount is different for every kind of business.
Yes it is, but we could define it algorithmically. Perhaps 5x the median of the last 5 years of operational expense? That would essentally say "you can run with no revenue for 5 years on this pile of cash, that's enough of a rainy day fund."
> Furthermore, putting cash into the market by force is basically just inflation isn't it?
No, you are perhaps thinking about "printing" money. Which is that money is injected into the economy instead of having it being generated by the economy.
> Yes it is, but we could define it algorithmically. Perhaps 5x the median of the last 5 years of operational expense? That would essentially say "you can run with no revenue for 5 years on this pile of cash, that's enough of a rainy day fund."
This is completely inadequate, and directly hurts the productivity of business (if for no other reason than forcing companies to account for it).
> No, you are perhaps thinking about "printing" money. Which is that money is injected into the economy instead of having it being generated by the economy.
Stagnant cash deflates the currency directly, like bitcoin on hard drives in the dump, or sunken pirate gold.
> No, you are perhaps thinking about "printing" money. Which is that money is injected into the economy instead of having it being generated by the economy.
Technically the Government prints currency, money is created by banks. It is a subtle distinction that is often irrelevant in microeconomics but it is an important distinction in macroeconomics.
If you have idle time when you can listen to lectures on audio, I highly recommend "Economnics" by The Great Courses[1] (which is currently on sale for $70 bucks for the DVD edition) Chapter 29 covers just this topic and it's fascinating.
They got bailed out due to lack of savings, but it doesn't mean the savings needed to be in cash. The issue took months to resolve - enough to take money out of various investments.
