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The sector and financial-flow accounts released with today’s GDP figures indicate an expansion of the pool of dead money flagged by this blog and by Mark Carney.
The National Balance Sheet Accounts have not yet been released for the second quarter, so we cannot update the accumulated total of $526 billion.
However, the updated Financial Flow Accounts report that private non-financial corporations deposited a further $21 billion of Canadian currency and $2 billion worth of foreign currency in the second quarter. In other words, corporate Canada is adding to its cash stash rather than drawing it down to finance investment.
The GDP figures indicate a modest decline in corporate profits. However, the more detailed sector accounts reveal an increase in undistributed corporate profits to over $96 billion from under $95 billion. Despite slightly lower overall profits, Canadian corporations managed to hang onto more after-tax cash.
The ongoing trend of corporate cash hoarding upends the argument for corporate tax cuts. Surely, governments should retain more of this revenue and invest it directly in our economy rather than adding it to corporate coffers.
Erin Weir is a CCPA research associate.
UPDATE (September 1): Quoted in today’s Globe and Mail (page B6) and Toronto Star (page IN1)
