In recent years it has often been assumed that one reason central banks cut rates is to force investors and companies to move funds from low-yielding assets, such as bonds or cash, into more productive investments that could produce better returns and growth.
But that economic theory is not playing out. A couple of weeks ago, for example, the US Association for Financial Professionals published a survey of corporate treasurers. This suggests that, far from becoming cash-averse, they are planning to increase rather than decrease their holdings of cash this summer. Indeed, they are more enthusiastic about cash than at any point since 2011.
A separate survey of investors from Bank of America Merrill Lynch echoes this point. In July the world’s biggest asset managers said they had 5.8 per cent of their assets in cash. The level has been rising this year and now stands at its highest point since November 2001, in the wake of the 9/11 terrorist attack on the World Trade Center. Remarkably, it even tops cash holdings during the post-Lehman panic in 2008. READ MORE