Economics
Companies Use Borrowed Billions to Buy Back Stock, Not to Invest
The long-standing relationship between corporate debt and capital expenditures has broken down.
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When the Federal Reserve cuts interest rates, making it cheaper to borrow, it’s supposed to deliver a direct boost to the economy. But one key part of that machinery has broken down.
Business investment used to rise when U.S. companies took on more debt—because most companies borrowed to add capacity. Nowadays, they’re likelier to funnel the money to shareholders.