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  1. #1
    Eartha is offline Member
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    depend on their own behavior

    Dear all,

    How should I understand the underlined?

    what does "their own behavior" refer to?

    Thanks in advance.

    Eartha

    Governments would like companies to start spending their cash piles. But as James Montier of GMO, a fund-management group, points out, that depends on their own behavior. In terms of national accounts, massive government deficit are a counterpart to the surge in corporate profits. The surpluses and deficits of the various sectors of the economy must balance, so a huge surplus in one sector must be balanced by deficit elsewhere. Governments spend money on goods and services or borrow money to finance social benefits, which are then also spent on goods and services from the corporate sector.

  2. #2
    emsr2d2's Avatar
    emsr2d2 is offline Moderator
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    Re: depend on their own behavior

    Quote Originally Posted by Eartha View Post
    Dear all,

    How should I understand the underlined?

    what does "their own behavior" refer to?

    Thanks in advance.

    Eartha

    Governments would like companies to start spending their cash piles. But as James Montier of GMO, a fund-management group, points out, that depends on their own behavior. In terms of national accounts, massive government deficit are a counterpart to the surge in corporate profits. The surpluses and deficits of the various sectors of the economy must balance, so a huge surplus in one sector must be balanced by deficit elsewhere. Governments spend money on goods and services or borrow money to finance social benefits, which are then also spent on goods and services from the corporate sector.
    It means that the government should start to practice what they preach. If they are going to encourage companies to start spending their cash piles, then the government needs to start doing the same thing.

  3. #3
    SoothingDave is offline VIP Member
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    Re: depend on their own behavior

    Quote Originally Posted by emsr2d2 View Post
    It means that the government should start to practice what they preach. If they are going to encourage companies to start spending their cash piles, then the government needs to start doing the same thing.
    Actually, I think it's saying the opposite. When the gov't is spending and running deficits, then business is sitting around hoarding cash. The implication is that if gov't stopped spending, it would force companies to spend more.

  4. #4
    BobSmith is offline Senior Member
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    Re: depend on their own behavior

    Quote Originally Posted by Eartha View Post
    How should I understand the underlined?

    what does "their own behavior" refer to?
    But as James Montier of GMO, a fund-management group, points out, that is: directly related to, or derived from, the government's policies.

    It means that while the government is saying they want companies to change the companies' behavior (i.e. it is the companies that are refusing to spend), it is really the government that has to change the government's behavior first. The rest of the paragraph goes on to explain why he believes this.

  5. #5
    5jj's Avatar
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    Re: depend on their own behavior

    I had to read it several times before I was (moderately) sure. I think that Bob and Dave are both right; ems is, on this occasion, not. The government is not sitting on huge cash piles which the companies want it to spend. Quite the reverse - the companies want the government to change its behaviour and stop spending.

  6. #6
    emsr2d2's Avatar
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    Re: depend on their own behavior

    Apologies. I wrote that very early this morning and I clearly hadn't grasped it. It has taken me five more attempts at reading it before getting to the bottom of it and agree with the others entirely. It's about as understandable as government fiscal policy!

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