But the ratio then soared to more than 150 percent by year-end 2004, as investment fell far short of cash flow from operations and net financing. This juxtaposition is unusual when the economy is expanding. Indeed, former Federal Reserve Board Chairman Alan Greenspan pointed to this unusual configuration a year and a half ago.
"Although capital investment has been advancing at a reasonably good pace," he said, "it has nonetheless lagged the exceptional rise in 3 profits and internal cash flow." Subsequently, aggregate cash holdings remained elevated through much of last year, even as the economy continued to advance smartly. Only in the very recent quarters has this trend seemed to abate somewhat.