How To Start A Financial Crisis Part 2

Guest post by Market Authority 

Yesterday, I highlighted the financial panics of the 19th Century (aka bank runs), how they start, and the government’s response to prevent future runs (the Fed and FDIC). As noted, regulators and economists are only able to locate the problems with the engine after the car breaks down. 

Today, let’s take a look under the hood of our current financial system to better understand how the economic machine overheated and was left stranded by the side of the road. 

Businesses are more profitable than ever with record amounts of cash on balance sheets. The following chart depicts the rise of corporate cash as a % of GDP: